More Evidence that the Bull Market has Further to Run

Has the Trump rally gone too far? Is the US stock market about to break?

Last Monday, we showed how the market likely has further to run. But today, after both the Dow and the S&P 500 have declined for two days in a row for the first time since January, the question remains: is it time to sell?

We don’t think so.

The S&P has just corrected from the sudden optimism that came after Trump’s speech to Congress:

Source: Financial Times John Authers’ Note

Still, there are strong economic indicators coming out of the US that justify a bullish scenario. Here are 3 important ones:

1- Americans spent more last month than ANY February since 2008.

Source: Financial Times John Authers’ Note

2- The US industrial sector is accelerating. Four main indicators are growing at a multiyear high pace: US outbound container traffic, global air freight tonnage, domestic rail volumes, and domestic trucking shipments:

Source: Financial Times John Authers’ Note

3- Trade flows continue to grow. This is despite the protectionist rhetoric we hear around the world.

Source: Financial Times John Authers’ Note

If we take a look at the rolling 10 year price return of the S&P 500 against past historical precedent, we see that the S&P 500 is still below the long-term average since the financial crisis:

Source: HORAN Capital Advisors

Also, incidentally, the last time the Dow gained 1,000 points in 24 days was in April 1999, but it was only in 2000 that the index reached its peak. It was also one year later that the S&P 500 reached its peak.

At UGC, we believe that the US stock market is likely in the later stages of the current cyclical bull market, which is being driven by increased confidence in the US economy and accelerating global growth. However, there is still plenty of opportunities for money to be made as this bull market likely ends in a blow-off top of euphoria.

If you want to learn how to invest in stocks and analyse the market to identify profitable or deadly turning points, contact United Global Capital today for a no cost, no obligation consultation on 03 8657 7640 or email info@ugc.net.au to learn about Quality, Value and Trend selection methodology.

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The information contained in this article is general in nature and has been prepared without taking into account your objectives, financial situation or tolerance for risk.

Joao Costa Pereira
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Joao Costa Pereira

Equity Research Analyst at United Global Capital
BSc Economics, MSc Finance
Joao is an Equity Research Analyst at UGC
Joao Costa Pereira
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