During my morning reading, I ran across an interesting article from Paul Lim via Time giving several reasons why the stock market will “rise for a ninth straight year.”
“For ordinary Americans, 2017 is likely to feel like the best year economically since the Great Recession.
The recovery is finally expected to trickle down to you in the form of an improved job market, higher wages, and growing spending power.
And, despite the advanced age of this bull, your improving fortunes just may keep U.S. stocks chugging along too, as consumers represent 70% of the U.S. economy.“
While his points are valid, but very debatable, it is critical to remember the stock market and the economy are two different things. GDP growth and stock returns are not highly correlated. In fact, some analysis suggests that they are negatively correlated and perhaps fairly strongly so (-0.40).
However, it isn’t just Paul pushing the bullish commentary, but virtually the entirety of the media press. The siren’s song of “stay long my friends” has risen as of late as the market has soared following the election. But here is the interesting takeaway:
The reasoning for the continuance of the “bull rally” over the last several years has been footed by the common threads of:
