U.S. stocks have enjoyed a massive bull run since March 2009. Lackluster GDP growth, a sovereign debt crisis in the European Union, the flash crash, a weak housing market, inflation fears, and high unemployment -- despite it all, the bulls march on, added by the Fed's easy money and a weak dollar.
It's fairly simple. "There's just not that many choices," says Mark Brown, managing partner of independent money management firm Brown & Tedstrom Inc.
He's got a point. Look at your options outside of equities:
- Housing: Low mortgage rates are enticing but a combination of stagnant prices, over-supply and tight lending are worrisome.
- Bonds: Treasury rates may be higher but lending to the government is still not a winning bet. Investors are collecting little more than 3% on a 10-year and the 30-year is yielding under 5%. Meanwhile, corporate bond yields are not much better. And, those once lucrative high-yield bond spreads are as tight as ever.
- Cash: A survey of 1-year CDs show most are yielding less than 1.25%. A 5-year CD only gets you 2.5%.
- Commodities: This has been a winning bet but May has harshly treated commodities, including precious metals.
Brown points out in the accompanying clip that, outside of of equities, it's hard to keep up with the rate of inflation. Plus, let's admit it, America's businesses are healthy, even if the middle class is not participating. "Corporate America's never been stronger," Brown says, citing strong earnings, strong balance sheets and reasonable stock valuations.
Brown expects stocks will continue to outperform for the next decade, citing historical trends that suggest we won't experience another lost decade in stocks. Some technical analysts may disagree, believing secular bull and bear markets have lasted about 17 years in post-war U.S. equity markets.
- high-yield bond
- bull and bear markets
- corporate bond yields
- the European Union
- balance sheets
- Corporate America