Last night, when reading about Apple’s earnings, I thought the market would open down today. After all, I have said many times that the market cares more about earnings than anything else, and Apple is such a big player in the market. I still believe that to be true, but I have also said the market cares mucho about economic fundamentals, as they are the underpinning of future earnings. So, when the market opened up today, I was both surprised and not surprised.
- Factory activity advanced at its fastest pace in nearly two years this month and the number of Americans filing new claims for jobless benefits hit a five-year low last week, providing surprisingly strong signals on the economy’s pulse.
I was surprised that Apple had little influence on the market and I was not surprised the market responded positively to the news above, especially when it follows on the heels of the news out of China.
- Growth in China’s giant factory sector accelerated to a two-year high in January, a preliminary private survey showed, as manufacturers received more local and foreign orders in an encouraging sign for the country’s economic rebound. The HSBC flash purchasing managers’ index (PMI) rose to 51.9 in January, the highest since January 2011 and above the 50-point level that shows accelerating growth in the sector from the previous month.
I suspect sometime in 2013 I will lose my role as convincer-in-chief, a position I took on for myself in the last three years or so as the US and global economy struggled to recover from the largest hit since the 1930s. Europe will need more time for sure, but the US and China clearly are picking up steam, and as they gather speed, the market will respond positively, as it has thus far in 2013, which gives the financial media fodder for its continual debate.
- Plenty of investors, analysts, and pundits are asking how long this will continue and what the reasons are for the rally, but another question percolating is whether we are entering a new secular bull market.
The reasons for the January rally are simple. The US and China are economically recovering more strongly and the US political crisis is defusing, albeit slowly. So, as the market looks out its 6-9 months, it sees a clear road ahead.
The larger question arising above is far more interesting to market players, particularly investors looking at a longer investment horizon. Is the market entering a secular bull market?
- A secular market trend is a long-term trend that lasts 5 to 25 years and consists of a series of primary trends. In a secular bull market, the prevailing trend is “bullish” or upward-moving. The United States stock market was described as being in a secular bull market from about 1983 to 2000 (or 2007), with brief upsets including the crash of 1987 and the dot-com bust of 2000-2002.
The answer remains to be seen, but as I wrote about recently, the voices of the doomsayers are fading as evidence is mounting the global economy is poised for a long, healthy run.
- What you’re reading about online and seeing…in the ebullience of the way stocks are trading – there’s a sense that this is it …
The “it” referenced above is this moment in time. The author of the comment is suggesting the market is sensing the transition from a series of bull rallies within a larger bear market to a series of bear rallies in a larger bull market. If so, the next five to 25 years could be the time of times to make your money work.
Trade in the day; Invest in your life …
