Investors sitting on the sidelines since the major stock market indices rebounded in early 2009 are probably thinking they missed out on one of the longest and strongest bull markets of the last 100 years.
After all, since the markets bottomed in March 2009, the S&P 500 index has increased more than 195%, the New York Stock Exchange is up 150%, the NASDAQ has advanced 250%, and the Dow Jones Industrial Average has climbed approximately 165%.
Does the five-year-old bull market still have legs? It depends on who you ask. In an effort to kick-start the economy, the Federal Reserve initiated its first round of quantitative easing, snapping up trillions of dollars in bonds. This sent short-term interest rates plummeting to near zero. The artificially low interest rate environment was supposed to encourage banks to lend more money to businesses and people.
The ultra-low interest rate environment has made it cheaper to borrow money, and is generally recognized as being the fuel that has propelled the stock market higher. The Federal Reserve has said it will not raise interest rates until the U.S. economy is on strong, sustainable footing.
With the current state of the broader U.S. economy, the experts at Learn-To-Trade.com believe the Federal Reserve will not begin to raise interest rates until mid-2015. That said, if the Federal Reserve does raise interest rates and the world’s largest economy starts to stutter, it could step back in and start its bond buying program again.
Using technical analysis, the major indices look strong from short, intermediate, and long-term perspectives. So long as the Federal Reserve keeps interest rates low, many believe the bull market will continue to charge higher. This could be good news for bull market investors who are either looking to get into the markets or are not sure if they should take profits off the table.
On the other hand, there are those who believe the stock market is seriously overvalued and ripe for a major correction. According to one analyst, 80% of U.S. stocks are overvalued.
How can that be? Stock indices are only as strong as the stocks that go into making them up. Despite reporting less-than-stellar results, stocks have been trending steadily higher. To make earnings results look stronger than they actually are and make shareholders happy, companies are cutting spending, buying back shares, and raising dividends.
Learn-To-Trade.com explains that using cash to repurchase shares and increase dividend payouts is a short-term investment strategy. For stocks to experience serious growth, they need to legitimately increase revenue. This could be difficult; in the U.S., 70% of the country’s gross domestic product comes from personal spending. That’s a tough number to maintain when jobs are hard to come by, wages are stagnant, and debt levels are up.
From a fundamental perspective, many U.S. stocks do not look strong. This does not bode well for stock market bulls, nor is it good news for those looking to strengthen their retirement or investing portfolio.
Or so it seems. There are many different investing strategies that can help traders make money whether the stock market is going up, down, or even sideways. You just need to know how to read the signals.
The trading professionals at Learn-To-Trade.com provide members with all of the tools necessary to trade in today’s complex, fast-paced market. In a professional and supportive trading environment, the Learn-To-Trade.com team teaches members proven technical analysis techniques which can be applied to any financial market: that includes stock option trading, stock index trading, futures trading, futures option trading, risk management, capital preservation, and forex trading.
So is the current bull market going to continue, or are the underlying fundamentals pointing to a correction? At Learn-To-Trade.com, we teach you how to profit, no matter where the stock market is heading.