Even the threat of the coronavirus couldn’t take away Aussie investors’ desires to buy stocks! After one day of being scared of the life-threatening virus from China, Wall Street was up overnight, which makes me pose the question I asked a few years ago, which goes like this: “Is it right that this time it’s different?”
If it is, stocks will rise this year and maybe for more years after this one, which should be great for our super funds, which have been stellar performers, even since the GFC.
Now this is the kiss of death statement that many expert market commentators and economists have made over the decades, and have lived to regret it. I won’t name names because the forecasting and prediction caper isn’t an easy one. Suffice to say, many cynics, critics and simple old heads of the industry will scoff at my claim that “this time it’s different.”
So what’s so different that makes my gutsy call, which incidentally, as I said, I made a few years back and so far has been proved right?
Let’s search for uniquely different ‘stuff’ that explains our crazy, stupid love for stocks, which are looking like the gift that keeps on giving! I should quickly add that they aren’t and they will one day crash but as we climb into the 12th year of this bull market, let me pinpoint the big differences out there that might explain this great run for stocks:
• Donald Trump! Now this is a US President who really is different. And if you debate that, then you better stop reading, as you’re not from the real world.
• Interest rates, which are so critical to consumer demand and are a huge cost to business, have never been so persistently low.
• There have never been any public forecasts that interest rates could stay so low for 10 years, until now! (I don’t believe this but many smart people think it’s a possibility.)
• Wages growth, which is a critical cost to business, hasn’t been so subdued, at least in my lifetime.
• China has never been such an economic force in the global economy’s history.
• Technology has never been so disruptive to conventional businesses and has led to the likes of Uber, Airbnb, etc., which have created competition and lower prices, partly explaining why inflation has remained so differently low!
• The Internet’s empowerment of consumers worldwide to access ‘stuff’ cheaper than ever before.
• The Internet’s empowerment of businesses and workers/contractors worldwide, which has effectively redistributed income from richer countries to poorer countries. We have businesses in Adelaide and Armidale who use workers in India, the Philippines and Vietnam for bookkeeping, computer services and even design!
• The trade war, which was really different and which could lead to different sources of economic growth than we would’ve expected, if Donald Trump hadn’t come along with his weird approach to negotiation. No one ever expected a US President to fight free trade, which, in reality, wasn’t as free as many thought it was.
• And then we have the central banks of the world who had to deal with the fallout of the GFC, which threatened a Great Depression but for most of the world ended up being a Great Recession that led to an unparalleled expansion of the money supply to rescue global economies. Once again this was hugely different.
• I should also point to the first time in world history a majority of people could be close to accepting they might have to live differently and pay more to reduce man’s impact on a climate that’s changing for the worst. That’s different.
I could go on but, as you can see, when you throw all these differences together, there is a pretty strong case for arguing, this time, that things are different. And given interest rates are so low and that it’s usually rising interest rates that kill stock market booms (with rates not likely to rise here in 2020 and only a smidge in the US, at the best), given this is a US election year and Donald Trump has put the frighteners on the Federal Reserve boss, Jerome Powell, then the stock market is likely to have another good year.
On my Switzer TV Investing programme on Monday night, Berman Invest’s Julia Lee told us that since 1970 we have seen 26 cases of a big double-digit rise in the global stock markets. And in 19 times the year after was a positive one. Both Julia and CMC’s Michael McCarthy, who had a big year with some great stock tips on my Monday show, both expect stocks to rise this year but with one difference, that we should see more volatility. This means there could be numerous buying opportunities but you have to work out whether you believe me when I say “this time it’s different.”
By the way, I think stock markets should be vulnerable to a big sell off or crash in 2021 but because of that long list of differences, who knows this could be the longest bull market of all time!
Now that would be different. P.S. If you haven’t seen the show, watch the latest episode here.