Bracing for the third longest Bull Run in history
The US stock market is seemingly oblivious to the tense geopolitics that is casting shadows of doubt over European stability. As American stocks and indices are surging fullsteam ahead, investors are living the dream and delighting in what looks set, if it continues to May, to become the third longest Bull Run in history.
When Obama was sworn in, during the heights of the Great Recession, investors were understandably nervous to trade currencies and stocks; only the safe haven assets, like the precious commodity gold, experienced any noteworthy gains. Yet from March 2009 the upswing in stocks has steadily gained momentum. Fast-forward to the present, and the Dow and S&P 500 indices haven’t enjoyed such good returns since the days of President Reagan. Just last week, stocks rallied again when the Federal Reserve suggested that future rate hikes will probably happen gradually. Even its chairwoman Janet Yellen jumped on the bandwagon and noted how stock prices are close to record levels.
Leading the current trend are a number of influential tech and biotech companies. The Nasdaq index, home to both these incredibly performing sectors, rose above the 5,000 mark on Friday 20th March, coming close to its all-time high of 5,048.6 back in 2000. That’s a real reflection of the success of its components. Twitter is the talk of the town, up 35% this year, Cisco is outshining Wall Street expectations, Apple is as strong as ever following its recent product launches and earnings figures, and the iShares Nasdaq Biotechnology exchange traded fund (IBB) has soared 20%.
The trillion dollar question now is whether or not it can last. Can the market continue its bullish streak and break new records? Or do the current highs mean that a crash is inevitable and imminent?
The good news is that many analysts share an optimistic outlook. Wells Fargo, for example, say that because of the great lows of the Recession, this bull market is likely to last longer than average. The multinational bank anticipates that stocks will return an average of 9% to 12% a year over the course of the next decade.
Three key trends certainly seem to justify this market confidence. First of all is the fact that today’s tech-savvy millennial generation will constitute one quarter of the US population in 10 years’ time. In other words, demand for the latest tech goods and services is likely to stay high and grow. Secondly, the stats reveal that the tech world spends a greater percentage of sales on Research and Development than any other industry sector. This focus on innovation will enable companies to stay ahead of trends and to satisfy and fuel the anticipated demand.
Last but not least, we must also consider the wider context in which these businesses are operating, namely the strengthening US economy which has recently boasted a series of positive data releases. Personal consumption expenditures were up in the last quarter of 2014, helped by the long-anticipated growth in wages and the high levels of employment. Public confidence and spending power is set to accelerate in 2015 and will have a positive ripple effect throughout the national economy. The irony of course is that it’s largely thanks to the technical revolution that the world is changing more quickly than we’ve ever experienced. And yet for that very reason today’s tech trends and corporations look like they’re here to stay for a while. Consider making these stocks a part of your trading portfolio.