Uncharted territory is always scary. Whether you're trekking the nether reaches of the Amazon jungle, or simply trying to time the top of a stock market that is trading at levels never seen before, it's nerve wracking to be someplace you've never been before.
For stocks, the list of reasons to be scared is prominently displayed everyday, whether it's the New York Times highlighting the market's continued addiction to accommodative Fed policy, or the Wall Street Journal's look at money flows and increased risk-taking, the way forward for stocks is clearly filled with warning signs.
And yet, strategist Brian Belski of BMO Capital Markets is on a bit of a "Buy America" tour, and lists at least three key reasons why investors don't want to turn their backs on the S&P 500 just yet.
1) Quality, Transparency, Consistency
Belski says he follows the investment axiom of "buying scarcity and selling capacity," and right now, he thinks the U.S. alone offers what investors want most. In particular, while jokes that Europe may have great coffee, he argues that the structural reforms of the past ten to twelve years have left American companies in a unique - and investable - position of strength. "That's the U.S." he says.
2) Way More Bull Market Ahead of Us
If you think the market looks a little toppy here, you're definitely not alone. While Belski obviously cannot rule out the possibility of a short-term correction, he can - and does - make the case for the pain trade, which is a higher market in the face of great pessimism.
"Fundamentally the U.S. is in very sound position, and we think it will continue to lead for the next three to five years," he says. Broadly speaking, he thinks a lot of new investors fail to appreciate what a bull market really is, reiterating his belief that we are "in the midst of an 18 to 20 year equity bull market cycle."
3) The Coming CAPEX Cycle
Belski says people not only forget that the U.S. is still the world's largest economy, and as a result, "is poised to continue to take business away from Europe and the emerging markets as manufacturing capacity comes back here." At the same time, he expects CEO's will have to start adding capacity to handle rising business volumes, and that this uptick in spending will fuel "what we think will be the next leg of the bull market" for 2014, '15, 2016.
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