This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why I'm Sticking By Dow 55,000

It's also important to consider what cheap really means for stocks. For value-driven investors who use the last five years as a look-back period, of course stocks look expensive today. Over that time period, stocks were bouncing back from absurd bear-market valuations.

When you're used to driving at 5 miles per hour, accelerating to 30 miles per hour seems pretty fast. But that doesn't mean that it's as fast as the car can go.

A Structural Rally

I mentioned earlier than so far we've largely been in a structural rally. So what does that mean exactly?

Since late 2008, the Federal Reserve has undertaken a policy of quantitative easing that's poured money into the markets by the dump truck full. With Janet Yellen stepping up as the presumptive replacement for Ben Bernanke, that faucet of free money isn't likely to get shut off anytime soon. But then again, it wasn't really going to be shut off anyway.

One result of "QEx" has been an everything rally. In short, stocks aren't the only asset class that's seen prices appreciate at a breakneck pace, it's just the only one that investors don't believe in right now.

Since the market crash, fixed income and commodities have both rallied hard too. When everything's going up, it means one thing: the monetary base is expanding very quickly. Luckily for U.S. investors, everyone else has been printing money too. That, and the safe-haven designation of the U.S. markets, has saved the dollar from getting shellacked.

But in this environment, stocks are the clear outperformer.

>>5 Stocks Insiders Are Scooping Up

Right now, investors are still overweight flight to quality investments like treasuries. But those investments are atrophying away under the low-rate, comparatively higher interest rate environment that we're currently knee-deep in. It doesn't take hyperinflation to create a toxic environment for low-risk assets, just negative real interest rates.

Stocks may not be perfect, but when treasury investors can't take the pain anymore, they're going to have to turn to stocks again. When that happens, the flow of funds will send the stock rally moving in earnest.

Looking back historically, the "Great Rotation" from safety investments to stocks has come between five and seven years after major market bottoms. That should make the next couple of years pretty interesting.
3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
SPY $206.45 0.50%
CMG $606.85 1.10%
GRMN $44.00 0.03%
INTU $101.28 0.26%
QQQ $107.36 0.63%

Markets

DOW 17,656.84 +60.49 0.34%
S&P 500 2,063.26 +5.62 0.27%
NASDAQ 4,982.36 +23.8920 0.48%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs