Unemployment is high. Gas prices are soaring past $4. And the stock market has doubled within the past three years. Does this bull market really have legs?
It’s hard to argue with someone who just won’t see the facts for what they are.
Over the weekend, I was talking to an acquaintance about the stock market. He said he didn’t believe we were in a bull market.
“The stock market has doubled in three years!” I said incredulously. “What more proof do you need?”
Apparently a lot more. The person pointed to high unemployment, gas prices soaring above $4, and every other negative in the economy and geopolitical scene that you can point to as a reason not to own stocks.
And that’s just fine with me. The more doubters we have, the more likely the market is going to run up. I’m going to start getting worried when people are extremely bullish and talk at cocktail parties revolves around the stock market.
Here’s why I believe the market still has legs:
I’ve said this many times before – the market is a forward-looking mechanism. Over the past few years, as stocks were heading higher, even when the economic picture was still bleak, I told you that stocks were telling us things were going to improve.
And while unemployment is still too high, things are much better. Joblessness has dropped from 9.9% at its recent high to 8.3%. Underemployment, which includes part-time workers who want full time jobs and people who have stopped looking, is at a three-year low at 14.9%.
Sales at restaurants were up 8.7% in February, indicating people feel more comfortable with their financial picture. Personal income was up 5.1% in 2011 and personal savings rose 4.6% in January, suggesting that Americans have more money in their pockets now than they have had over the past three years when both of those figures were declining.
Business is picking up all over. Try to get into a decent restaurant these days. They’re packed. Revenue in Las Vegas was up 29% in January. When was the last time you had an empty seat next to you on an airplane? My conversations will realtors all indicate a significant pick up.
Are things perfect? Absolutely not. There are still people hurting and businesses that are struggling. And although the problems of the past few years were very real and significant, this time wasn’t different, and the economy and markets rebounded like they always have.
I suspect there’s plenty of upside left in this market. I expect us to hit the recent highs in the S&P 500 of 1,576. Strong stocks like Apple (Nasdaq: AAPL), Las Vegas Sands (NYSE: LVS) and Qualcomm (Nasdaq: QCOM) should continue to lead us there.