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July 18, 2013

July 18, 2013

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The U.S. Market is Fundamentally and Technically Strong

In the last couple of weeks, the Dow Jones Industrial Average got a buy signal from the venerable Dow Theory.  The S&P 500 hit new highs, and many other technical indicators are moving up.  The market trends — technical and fundamental — are positive.  Corrections can happen at any time; they are normal.  We believe that the longer-term trend is up.  Yields on stocks are higher than yields on U.S. government bonds of seven years or less.

It has long been said that “bull markets climb a wall of worry.”  The current bull market  is no exception.  Fear-creating headlines are all over the market media.  For example, here are a few quotes from market publications or talking heads over the last few days:  “stocks are too high,” “earnings will fall in the next quarter,” “higher interest rates will spell the end for stocks soon.”  We dispute these views.  We believe that U.S. corporate profits are going to be positive.  We believe that as long as short-term rates — which compete for stock market money — stay at a reasonable historical level (below 4 percent for 10-year bonds), stocks can continue to rise.  We believe that the economy of the U.S. is very slowly improving.  A stronger economy is good for corporate profits, and rising corporate profits are the key to higher stock prices…

There are two positive developments that are happening.  Upgrade your subscription today to find out what they are.

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Industries We See as Attractive

We have a section highlighting the industries we see are attractive.  To read our analysis on what industries are poised to do well, upgrade your subscription to a Gold Subscription.


American Consumers: Buy Now, or Hold Your Peace For a Long Time

Some people have been frightened by the rise in interest rates.  Granted interest rates have risen.  However, they have a long way to go before they become a real dis-incentive to buyers; nonetheless, the resultant psychology is very real — and is likely to encourage home buyers, car buyers, and appliance buyers.  American consumers buying on credit are thinking they better buy it now.

Consumer surveys show 72 percent of households expecting rising rates in the next year — up from 40 percent in May.  The Fed’s communications issues have indeed had a sharp effect on consumer sentiment.

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Source: Credit Suisse

 

Further, although consumer sentiment as a whole is not skyrocketing, consumers also feel now that they have more money to spend.

All of these data points are bullish for consumer spending on big-ticket items, and for the industries who supply them.

 


Guild Basic Needs IndexTM

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Track our analysis in these letters and at www.gbni.info.


In this week’s Premium Global Market Commentary available to Gold Subscribers, we feature:

  • Executive Summary 

 

  • Rising Equity Values and Interest Rates Boost Pension Fundseapons of Mass Deception

    We’ve commented on several occasions in this letter about the shaky status of pension funds, both corporate funds and funds for state and municipal employees.  Many states are still in trouble due to chronic underfunding, mismanagement, and fiscal sleight of hand — with Illinois, Connecticut, New Jersey, Hawaii, and Louisiana ranking as the worst.  Moody’s estimated at the end of June that the total shortfall in state pensions was nearly a trillion dollars…

 

  • Is It Time To Invest in India?

    To read our analysis upgrade your subscription today.

 

  • The Humane Potential of the Ed Tech Revolution

    After a century of promises that various technologies — from typewriters to televisions — would change the face of education, current promises seem set to make good.  The convergence of cheap processing and storage, cloud computing, big data analytics, and broadband internet may finally represent a technological shift that will reshape educational practice radically.  And as a consequence, venture capital is flowing into ed-tech startups at rates not seen since the dotcom bubble…
     
  • Guild’s Premium Global Market Summary

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