Sell in May and go away. Or don’t, which is the choice investors have made thus far when you look at the stock market, which has hit one all-time high after another and continues its ascent.
Author and investor Zachary Karabell tells The Daily Ticker this is more than just a blip in a broader bear, THIS, is a new bull market (as in the secular kind, with staying power).
Here’s why, according to the president of River Twice Research, which he discusses in the accompanying video.
- First, the obvious: bond yields are low, people are reaching for yield.
- Second: corporate earnings. “There is one place in the world that’s dynamic,” Karabell says. “It’s not national economies…it’s companies doing interesting things globally and nationally. And insofar as those companies are represented by their stocks, they are where you want to be. Because that is the only place of excitement and dynamism in this global system we’re in." But what about top-line weakness? S&P 500 companies only beat revenue expectations around 43 perent of the time this earnings season, below the average beat rate of 52 percent over the last four quarters. Watch the accompanying video to see how Karabell responds
- Also: The skepticism of this “most unloved” rally is good for a bull market. “If you want a bull market to continue what you want is constant skepticism and not enough participation,” he says. “You don’t want 1997, you don’t want a 2007 where there’s all this liquidity because people are convinced things are going up – you want people skeptical that things are going to go up as they go up, because it means you won’t get so far ahead.” And by the way, the “great rotation” out of bonds and into stocks still has a long way to go, according to Karabell.
Also, as for the idea that stocks have gotten ahead of themselves when you look at the disconnect from the real economy, Karabell says that can continue for another ten years. In the video he explains why borderless companies are not burdened by the all of the drags that weigh on national economies saying, “invest in companies, not countries.”
He is positive on sectors "tied to our lives" like tech, industrials and consumer names. He thinks healthcare spending has to come down long-term because its too big relative to its productive use, so he's more wary on that sector even though it's done so well.
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More from the Daily Ticker:
- Zachary Karabell