CNBC.com had an interesting article about a “controversial theory” called secular stagnation. Read the full post to get the low down but basically it looks at the relatively anemic recovery and concerns about future consequences for the accommodative policies of the last six years.
This of course raises questions about whether there will be a consequence for equities. Regardless of anything else going on in the world, domestic equities have had a stellar five+ year run and you likely have heard that this has been the most hated bull market in history.
It has been difficult to adequately articulate the last five years but the CNBC article is constructive. The market is up 150-whatever percent from its low but this gain has come against a backdrop of unprecedented central back stimulus. The economy has grown relatively slowly and although jobs have come back there has been a sort of evolutionary step in the US jobs market that has left many people underemployed which leads to all those stats we read about being under saved, not having it better than our parents and so on. A few years ago there was a popular meme that it would have been cheaper to just give everyone $100,000 than try to stimulate jobs growth the way that we did. At the same time the wealth gap has widened.
The concern is that with all the stimulus injected, we’ve still only had this very anemic recovery.
Many of the folks who have been bearish and missed the bull market (I tend to think people were more underinvested as opposed to actually missing the rally, but many talk about those who have missed the rally) have done so because given the totality of the situation, stocks should not have gone up this much. It defies much of what we have learned and know about markets and economics.
It would be difficult for someone conducting a top down, fundamental analysis of the US to have concluded the US was a buy (blood in the streets notwithstanding). And based on how anemic the recovery has been I’m not sure that the conclusion would have ever changed. Yet the market has obviously gone higher, exceeding the average bull market duration by 26 months (and counting?).