But Can this Rare Combination Last?
Again, we have not seen this mix of economic strength matched with market tranquility for at least 50 years. This comes close to the economic ideal of a stock market responding smoothly to an ever- growing economy. Think of it as driving down the highway on cruise control as compared to bouncing around in the roller coaster that was the 1990’s bull market.
But can it last? It is in our human nature that when things are going well there is this nagging anxiety that things are about to change for the worse. And so it is with our fears regarding the future course of the economy and the market. Many brokerage firms and asset managers are preparing their standard market forecast for the New Year and some see changes on the horizon.
The one thing we can say for certain is that the situation will change for the worse at some point, but we do not know when. There are any number of prognosticators telling us why and when this will happen. But the evidence reveals these predictions are mostly hot air (think 10-day-ahead weather forecasts) and provide little or no useful information about the future. Furthermore, studies show that the current length of the economic expansion and the bull market are not predictive of when either will end. Similarly, the performance of the markets in one year is predictive of its performance in the next.
History tells us that some unforeseen event, such as an oil embargo, an S&L crisis, a mistake by the Fed, or something that has never happened before, will torpedo the expansion and the market. There is little we can do to anticipate the demise of this wonderful combination of strength and tranquility.
So, all we can do is enjoy it while it lasts. And what a beautiful place to be, in this best of economic and stock market times!
C. Thomas Howard is CEO of AthenaInvest.