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When is the Next Bear Market?

Steve Reitmeister

Consider this....Even in the remotest corner of the world, everyone understands the law of gravity. When you drop something, it will fall to the ground.

Interestingly most investors don't really understand the natural gravity of stocks. In fact, they find every way possible to confuse matters with too much commentary, charts, and data.

Plain and simple, the gravity of stocks is to move up. Meaning that to move higher is their natural progression UNLESS an opposing force gets in their way.

I'd like to prove this point so you can better understand why the bull market is still in place and why we have not yet seen the highs. Plus I will share with you the signs that eventually lead to the next bear market.


Growth is the Most Natural Thing in the World

I don't mean to get too philosophical here, but it is important to understand that advancing forward is a prime driver of the human condition. This innate desire to do things better leads to improvements in productivity and our standard of living.

It also creates greater economic activity, which is another way of saying higher profits. And profit growth is the main ingredient we investors seek when selecting stocks.

To boil it down:

Human advancement = higher economic activity = higher profits = higher share prices.

The above equation proves why the natural order of things is for the stock market to move higher. Unfortunately it's not all rainbows and lollipops.

More . . .


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Until Sunday: See Where Steve Puts His OWN Money

Time is running out to look inside Zacks EVP Steve Reitmeister's personal portfolio and follow where his own hard-earned dollars are invested.

Today you can still see his handpicked trades for riding the coming wave of defense and infrastructure spending, reduced business regulation, and lower taxes. With this positioning, he expects to outperform the broad bullish market by 2X, even 3X over.

IMPORTANT: The picks are now in exceptional demand and access must close to new investors Midnight Sunday, February 26.

See Steve's trades right now >>

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Boom and Bust Cycle

One sad thing about the human condition is that we are also prone to believing that the good times will last forever. This leads to excesses during the boom times that pave the way for the next bust. (And often those excesses are about people, businesses and governments becoming over leveraged).

Here is the equation for a recession:

Lower economic activity = lower profits = *lower share prices
(*average stock market decline during a recession is 34%).

Gladly the average US recession only lasts about 13 months while the average expansion enjoys a healthy 63 month reign. That means we are able to take five good steps forward for every one backwards.


What Does that Mean for the Future?

It should be clear by now that my premise is this:

Stocks will continue to advance until there are signs of the next recession.

Of course, I don't mean stocks will go up every day, week or month. There will be meaningful corrections and pullbacks thrown into the mix. And their timing will only be evident after the fact.

Plain and simple, the primary long term trend will be bullish until the odds of a future recession increase. Right now the odds of a looming recession are very low. Especially as the new DC administration contemplates substantial tax breaks which could usher in a new generation of GDP, earnings and share price growth. Thus, it is best to stay in the bullish camp until some more ominous dark clouds emerge.


What to Do Next?

The above may give the false impression that just about any stock will do. But certainly you understand that some shares will do much better than others. That's because the easy money in this bull market took place in the first five years. Now it will be slower going as the bull market matures.

To put the odds strongly in your favor, you should rely upon a proven stock rating system like the Zacks Rank with audited results of +25% per year since 1988. However, there are over 220 of these #1 Ranked Strong Buy stocks to consider at any given time.

That is fine if you are a professional investor with 60-80 hours per week to focus on researching the full list. For the rest of you, it's usually better to consider a hand-selected group of these stocks that you can more easily put into your portfolio.

Today, I will show you 12 stocks and 3 ETFs that fit the bill. In fact, I have put my own family's money into them. Go ahead and view them (along with new trades I will post) in the Reitmeister Trading Alert.

Even with the markets at all-time highs, economic indicators make this a compelling time to go long. Plus, the expected surge in defense and infrastructure spending, reduced business regulation, and lower taxes are very enticing to investors.

But, as suggested earlier, corrections are inevitable which is why I am constantly vigilant.

That's another reason to keep an eye on what I'm doing with my own money. I can alert you to developments that affect our trades and the market in general.

This portfolio service, which is normally closed to new members, was temporarily re-opened Wednesday and its trades are in exceptional demand right now. So if you want to check it out, I suggest you click the link below right away. It closes up again Sunday, February 26th at midnight.

Look inside the Reitmeister Trading Alert portfolio >>

Best Regards,

Steve

Steve Reitmeister has been with Zacks since 1999 and currently serves as the Executive Vice President in charge of Zacks.com and all of its portfolio services and research tools for individual investors. He is also the Editor of his Reitmeister Trading Alert.


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