Our frequent guestposter Yves Lamoureux, president of Lamoureux & Company, a market advisory firm based on behavioral economics, has a view on stocks: up! Neely sees the S&P in a final thrust up. The grinding climb of the Wall of Worry that has characterized this market since 2009 will continue until a final, panic-buying stage sets in. We may be now entering it. From Yves point of view, so what; a tumble in 2014 will simply set the stage for more appreciation downstream. Two competing lomg-term views that share a short-term prediction. Enjoy Yves perspective.
Climbing a wall of worry at its best
We are of course not surprised at the reaction of players who have missed the rally.
They will spew any and all reasons for this market to crash. Yes, it will eventually encounter a degree of such devastation that we would rather keep our timing to ourselves at that moment.
The gigantic money inflows was and is still the driver of this great move. There is more money on the way. It should be showing, as we have repeatedly explained, an exponential tendency.
We model interest rates for the next 15 years and believe that savings will never carry an explosive growth path of debts.
Forward looking the gap will only increase faster. This spread in turn will pressure bonds lower. It will wipe out a generation of bond only buyers or what we see as income oriented investors.
People argue that stocks will rise as the economy performs better. We are not of this school of thought. We object to much improvements going forward for developed markets.
Our behavioral work distinguishes between losing assets and winning ones by carefully tracking shifts in sentiment, which fundamental analysis disregards.
Being long the euro currency this year best exemplifies this kind of approach.
Two recent shocks over the last decade have profoundly shaped the perception of investors. This has forced a re-balancing of assets in favor of income. This is coming exactly at the heels of the greatest acceleration of debts worldwide.
I did use the word crushed in an appearance on Yahoo Finance to describe what was at stake for bond investors.
We will not sugar coat our language when it comes to interest rates. We have tried to shock portfolio managers in presentations this year.
We can only describe the level of apathy we have seen as unbelievable. This is what a 30 year bull market will do to public opinion.
Our bullish stance has been validated this year with great returns.
We do suspect that we are heading for a rather tumultuous 2014. We think it is a bump in the road.
Our forecast for the Dow to double from next year's low point remains compelling.
As long as the market climbs a wall of worry, we will climb profitably with it.