Neil Hennessy is bullish on the U.S. stock market.
Hennessy, who predicts that the Dow will hit 20,000 by the middle of 2017, is the president, CIO and portfolio manager of Hennessy Funds, which has some 16 funds and some $6.5 billion in assets under management. Indeed, barring a catastrophe such as another terrorist attack that could disrupt the U.S. economy, Hennessy predicted a continuance of the bull market, which some market observers believe is now long in the tooth.
“Everyone says that this eight-year bull market has got to be over, but they never give a reason why it should end,” according to Hennessy, whose comments came on Wednesday at a luncheon meeting in Manhattan.
He cited numerous reasons why the strong stock market should continue: Corporate profits are strong, debt is down and American banks are much stronger than they were eight years ago. Hennessy also contends that lots of new money will be coming to the stock market. He said that investors in low-yielding fixed-income products, with trillions of dollars in assets and in an environment in which interest rates are rising, will inevitably turn to the stock market.
“I think we’re back in the 1982-2000 market and there was an 18-year run of that,” he added. Hennessy noted that in that almost two-decade period that the market was up every year save 1990, when the market was only down one half of 1 percent.
But couldn’t overexuberance make investors reckless and spoil the continuance of good times?
Hennessy rejected that. He noted that the Dow Jones P/E at the beginning of 2000 was 44, but today it is less than half of that. He said “clearly we don’t have the euphoria” that can ruin bull markets.”
Hennessy also argued that the Trump effect, a new administration viewed as friendly to Wall Street and business, could re-enforce the bull market the new president inherits. Hennessy argues that three of the biggest challenges faced by American business are health care, taxes and regulation, all areas the new administration has pledged to change.
“Can you image if there is some reprieve in any one of those areas; what would happen to corporate profits? The mood on the street right now is that this administration is going to be a lot friendlier than the prior administration,” according to Hennessy.
Hennessy, questioned about what could go wrong in this wonderful world of tomorrow scenario, said he could not anticipate every last negative possibility for the markets in 2017. However, he said another big World Trade Center terrorist attack, which shut down the markets for several days, might be one possible interruption of otherwise strong markets. Still, on the whole, Hennessy sees bullish markets.
Besides United States stock markets, Hennessy likes Japan. He says record tourism numbers combined with the 2020 Olympics will make the Land of the Rising Sun the gateway to the Asian economy.