Throughout the past several years, we’ve watched as the bulls pushed valuations higher and higher. However, the investing landscape is changing; and changing quickly. The big question now is whether or not the bull run is likely to continue. Today, we’ll talk about how the investing landscape is changing, what is likely to be the key determining factor for market movement throughout the next quarter, and what we can expect to see moving forward. So, let’s get right to it…
How The Investing Landscape Is Changing
To be honest, there are several factors that play a role in the changing landscape we’re seeing lately…
- High Valuations – First and foremost, the bulls have been running for quite some time now. As a matter of fact, this is one of the longest bull runs in the history of the United States market. This growth comes with its own inherent dangers. The reality is that the growth we’ve seen in the market has pushed stocks to dangerously high valuations. Overall, US stocks are trading at about 17 times earnings. At this point, investors are paying a premium to own stock which is likely to hinder their willingness to push prices any higher.
- The World Is Going Bankrupt – Upon reading a post recently published by Michael Snyder, I was taken by surprise. In his post, Mr. Snyder explained that there are currently 24 countries, including Greece, Spain, Ireland, Cyprus and more that are facing a full-blown debt crisis. In his post, he explains that the world is going bankrupt. While this is a bit of a grim idea, through my own research, I found this statement to be incredibly credible. This is likely to weigh heavy on the market as investors know that a poor worldwide economy leads to poor market movement.
- Oil Is Likely To Continue Falling – Oil is a driving factor for the S&P 500, the US economy, and the economies and markets of nations around the world. Unfortunately however, oil is likely to fall further in value. As a matter of fact, some experts are predicting that US consumers will see $2 per gallon gas prices; an unprecedented feat to say the least. The reason oil is likely to fall further is a result of the Iranian nuclear deal. With the deal, sanctions on Iran will be lifted; leading to more oil hitting the already over-saturated market. As the basic idea of supply and demand tells us, this will drive the value of oil down exponentially.
The Determining Factor With Regard To Whether Or Not The Bull Run Is Likely To Continue Through The Next Quarter
In my opinion, the biggest determining factor with regard to the bull run is the results of the second quarter. The bottom line is that there were several factors that could drive earnings down for major corporations for the quarter. Considering the damaging affects of a strong dollar, low oil prices, poor consumer spending figures, and more, corporations are likely to produces poor results. However, if they are able to produce positive results through the struggles, chances are that investors will continue to have faith and continue to drive the values of stocks up; and believe it or not, it seems like that’s exactly what’s going to happen.
Don’t get me wrong, there are still pivotal earnings reports to come. However, the most influential earnings reports that have been released so far have proven to be positive. For example, Google’s earnings were so positive that we saw the biggest single day gain in the market capitalization of the company in history on the day earnings were released. Also, the banking sector is doing incredibly well; with JPMorgan, Bank of America, and Citigroup all outperforming analyst expectations. While I am expecting to see grim news from the energy sector, I think that it’s likely that strong earnings in other sectors will keep investors on the bullish edge.
What Do You Think?
Do you think the bull market will continue? Why or why not? Let us know in the comments below!