David Rosenberg thinks this bull market is a sham.
In his Wednesday interview with CNBC’s “Trading Nation,” he warned that this record-breaking bull market (it’s the longest in history as of August) paired with the weakest economic expansion of all time has only been possible thanks to the flood of cheap money from central banks.
He’s predicting that first we’ll see pain in the corporate bond market, where rising rates will put severe pressure on a handful of companies that turn out to be the canaries in the coal mine for what’s ahead.
And he’s not alone.
Last month, chief investment strategist at Bank of America Michael Hartnett proclaimed the “Great Bull” market is over – and he also blamed rising rates.
Of course, with a record 3,453 days without a 20% correction, this market can’t keep making history forever.
We all know there will be a reckoning – but when?
One thing to keep in mind is that staying out of the markets can actually be more expensive than staying in.
Say it’s January 1999 and you have $10,000 to invest.
But it’s a scary time to be pondering an entry into markets. The Dow is up 25% from last year alone. Since three years ago, it’s up an amazing 111%.
So you’re too late, right? Grab a bull by the horns and you’ll end up gored?
Not so simple. From January 1999 to January 2000, the Dow returned another 25%. A simple index fund, even at that late stage of the bull market, would have turned your $10,000 into $12,500.
Of course, a handful of companies did a lot better in the last leg of that bull market.
Just think – from January 1999 – 2000, Qualcomm returned an amazing 2,487%. Even Apple, which was mired in a disastrous turnaround in the late ‘90s, nearly tripled investors’ money from 1999-2000.
If you’d looked at the toppish-seeming markets, and took a pass on putting your $10,000 into them – you could have lost a lot more than $10,000, just by forfeiting potential upside.
Of course, hindsight is 20/20 as the cliché goes.
But the parallels between today’s markets and the Dot.com mania are hard to ignore – both the lessons on risk AND reward.
And even if you disagree with this analyst that a stock market “Melt Up” is just beginning to ramp up — you can’t deny that 2018’s biggest winners so far (tech stocks are leading the charge, with Netflix alone up 68% for the year so far) look a lot like 1999’s tech-heavy list of frontrunners that multiplied investors’ money back then, too.
Again – the bull market has to end. But it doesn’t have to end tomorrow, or even 18 months from now.
And in the meantime, who do you think will look smarter when it’s over? People who got out today… or people who ramped up their tech investments (and keep risk management like trailing stops in mind) – while they ride their winners into the sunset like it’s 1999?