Four Reasons Stocks Are Due for a MASSIVE Melt Up Next Year
Yesterday, I outlined my forecast for the stock market going forward.
That forecast is that stocks are due for a correction, but then we will see a run to new all-time highs.
My ultimate forecast for this bull market is 4,000 or possibly even 5,000 on the S&P 500.
I realize this sounds ridiculous right now. But consider the following:
- The Fed is now providing over $100 billion in liquidity to the financial system per month.
- Corporations are scheduled to buy nearly $675 billion worth of their own stock next year.
- Investors are sitting on $3.4 trillion in cash. This number is up $1 trillion over the last three years despite stocks hitting new all-time highs.
Regarding #1, the last time the Fed was providing this much liquidity to the financial system was when Lehman Brothers failed in September 2008. At that time unemployment was already over 6%, the stock market had lost more than 20% from its previous peak and was entering the worst crisis in 80 years, and the U.S. economy was six months into a deep recession.
Today, the Fed is providing this much liquidity when unemployment is 3.6%, the stock market is at all-time highs, and the U.S. economy is growing by 2-3%.
This is the kind of environment in which the stock market can reach truly insane levels.
Regarding #2, corporate buybacks remain the largest source of buying power in the stock market today. And with corporations scheduled to buy $675 billion worth of their own stock next year, that’s a LOT of buying power boosting stocks higher.
And unlike real investors who are picky about prices they pay, this $675 billion in buying power is indiscriminant and will occur on a SE schedule.
Regarding #3, this current bull market might be the most hated bull market in history. Despite stocks over 20% this year to new all-time highs, investors are currently sitting on over $3.4 trillion in cash.
That’s $3.4 trillion in cash, sitting in a money market account, earning less than 2%, while stocks have exploded 20% higher.
At some point, these investors are going to realize they’re missing out, and they’re going to start buying stocks. If even 10% of this cash ($340 billion) moves into stocks next year, we’re talking about over $1 trillion in buying power hitting the markets due to real investors and corporate buybacks ($340 billion +$675 billion= $1.0+ trillion).
That’s over $1 trillion in buying power hitting stocks in a single year… at a time which the economy is growing, unemployment is below 4%, and stocks are already at all-time highs.
Again, this is the kind of environment that can lead to truly insane stock levels. Even during the Tech Bubble in the late ‘90s, this kind of buying power wasn’t happening.
Simply put, I believe stocks are due for a mega melt up. And the chart tells me it’s a real possibility. The S&P 500 just broke above resistance within its mega bullish channel.
You can see this in the chart below.
However, there’s another fourth reason why I believe the market is about to explode higher.
It all started with an un-reported meeting at the White House in February. While there is no official record of the meeting, a White House spokesperson has now admitted the meeting did take place.
Now, after months of research, I’ve uncovered what was discussed at this meeting.
I’ve put together a report outlining who was there… what was discussed… why Trump’s strategy will ultimately succeed… AND the stock that will soar once he lands his second term in office.
Editor, Money & Crisis