Extended Cycle

With rates at history-of-mankind lows, coordinated central bank policy, just in time manufacturing, globalized and flexible labor, and on the heels of the worst financial crisis of 100 years what if this is a bull market in slow motion?  What if this bull market becomes a 20 year recovery.  

Here’s a narrative of why markets could continue to rise. 

Pessimism is at all time lows.  Lower than in March 2009. Stock market valuations are above averages but not near historic highs and equities on a relative bases are eons cheaper than bonds which trade at an equivalent price-to-earnings of infinity in Europe and Japan and around 70x in the US.  

The dividend yield on the S&P is about 50% higher than bonds, and equity subsections like emerge and technology are still very cheap on a yield basis in a yield starved world. 

While there are local areas of real estate excess like in NYC the broader main-street recovery is still underway as household formation was delayed a decade by millennials.  This, the “echo-boom” has yet to enter their highest earning (and spending) years.  

My generation, GenX, is a population bottleneck which is set to be digested as the echo-boom takes over. 

No one knew what would happen with Brexit (and no one still does). Likewise, all the whiz-bangs on wal street and On TV may just be missing the forrest through the trees.