US Stock index futures have made fresh records as world markets rally on the back of easing tensions in the Middle East. Dow Futures along with futures on the S&P and Nasdaq are climbing higher.
As tensions eased between the US and Iran, US equities hit record highs with tech shares outperforming. Apple jumped after Chinese data shows that iPhone sales rose by 18% in Dec. in the country.
As for the US-China trade deal, President Donald Trump said he might wait until after the 2020 presidential election to reach the second part of the trade deal. After being at odds over commerce for two years now, both the counties are set to meet next week at the White House to sign the first phase of the agreement.
1. S&P 500: All-Time High
2. Dow: All-Time High
3. Nasdaq: All-Time High
4. Home Prices: All-Time High
5. Expansion: longest in history (126 months)
6. Unemployment: 50-yr low (3.5%)
7. Job growth: longest in history (110 months)
8. Fed: expected to cut rates for 4th time in 2020 pic.twitter.com/2drPiHAHQ7
— Charlie Bilello (@charliebilello) January 9, 2020
As such, Shep Perkins, CIO at Putnam Investments has called for S&P 500 to reach 5,000, faster than you might have imagined. Historically low long-term bond yields combined with price-to-earnings multiples that are in line with their average and could further expand are the reason behind this forecast.
S&P 500 might have closed Thursday at a record 3,274.70, but 5,000 could be seen as soon as three years, even if a recession hits, it could take five years.
But Everything isn’t All Shiny
However, it doesn’t mean the market isn’t vulnerable. Wharton School professor Jeremy Siegel is “worried that this is becoming a momentum-driven market at this point.”
The 2019 rally had S&P 500 gaining about 29% in its best performance since 2013 but Siegel is worried that “if it continues much longer that something will puncture it and people will get off the train.”
Also, according to the popular measure of price-to-earnings (P/E), the S&P 500 index is trading 18.6 times forward earnings. Based on the median price to earnings ratio, it is overvalued by about 30%.
Another bearish picture is shown by the bullish nature of the “Greatest Predictor” of the US stock market’s future. The Greatest Predictor is the average portfolio allocation of households to stocks. A contrarian indicator, high allocations results in poor subsequent returns and vice versa.
Not to forget that the World Bank has highlighted the risk of a fresh global debt after warning about the biggest buildup in borrowing in the past 50 years.
“Low global interest rates provide only a precarious protection against financial crises,” said Ayhan Kose, a World Bank official.
“The history of past waves of debt accumulation shows that these waves tend to have unhappy endings. In a fragile global environment, policy improvements are critical to minimize the risks associated with the current debt wave.”
An Alternative Solution Is Already Leading ‘em all
While stock market enjoying the longest bull run, Bitcoin emerged as the winner of the decade with a mind-boggling 9,000,000% gains.
What’s exciting is the world’s leading cryptocurrency is getting prepped up for its next bull run with a highly anticipated halving event coming up this year. According to some commentators, one BTC would be reaching a million dollar worth in the coming years.
While Fed cutting interest rates are pushing pressure on banks and robbing people from their savings, it would end up driving them into the asset class which will provide them with better returns.
The digital gold, a peer-to-peer digital currency system that has a fixed value and is censorship-resistant, has also started to show signs of becoming a safe haven in times of macroeconomic and political crisis.