Before we get into all the good news out there, let us first take a look at what the term "news" really means. By definition, the term "news" means the exception to the norm. If it is expected to happen then it is not news. If it differs from the norm, then it is news.
Here is a good example - if on a given day all planes landed safely at JFK International Airport in New York, is this news? Nope. If one of those planes crash, is this news? Yep. See what I mean. Take into account also that media needs to sell itself whether through subscriptions or by advertisements and you end up hearing a lot of bad news. I don't know about you but I want to enjoy my life and not have the media make me feel depressed. So, let us take a look at some of all the good things happening on Wall Street which I feel will lead us into the next bull market for stocks.
- Corporate earnings are near an all time high and are growing at a double-digit pace.
- Corporate balance sheets are stocked full of cash. Companies in the S&P 500 Index have $634 billion in cash that can be used for equipment purchases, dividends, share buyback programs, or acquisitions.
- Cash sitting in money market funds and savings accounts are at high levels. Money market funds alone are at $1.9 trillion. This is potential fuel for the stock market.
- Total employment in the US is higher than it has ever been and the unemployment rate is below the historical average.
- Personal net worth excluding your home is at record levels.
- The money supply growth has been positive. M3, the broadest measure of money, has grown by $266 billion so far this year.
- Interest rates are still low.
- Inflation is low.
- The S&P 500 Index's price-to-earnings ratio is actually lower now than it was at the bottom of the bear market in October 2002.
In my opinion, stocks look undervalued now compared to other investments. One of these days something will happen, I do not know what, that will trigger the market to move higher. Even the Fed's own model shows the S&P 500 to be about thirty percent undervalued. Plenty of good news out there . . .
Peace and Goodwill!
Roland R. Manarin is president and founder of the Manarin family of financial companies which manages in excess of $350 million.
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