{"id":38195,"date":"2013-05-10T12:09:49","date_gmt":"2013-05-10T16:09:49","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=38195"},"modified":"2013-05-10T12:09:49","modified_gmt":"2013-05-10T16:09:49","slug":"how-long-can-the-bull-market-run","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/05\/10\/how-long-can-the-bull-market-run\/","title":{"rendered":"How Long Can the Bull Market Run?"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

The Dow over 15,000\u2026the S&P 500 over 1,634\u2026the Nasdaq at highs not seen since the 1990s Tech Boom\u2026 Any way you slice it, we\u2019re in a bull market.<\/p>\n

Alas, we\u2019ve been here before, and it didn\u2019t end well.\u00a0 So, is it time to worry?<\/p>\n

My answer is \u201cno,\u201d or at least \u201cnot yet.\u201d\u00a0 The conditions are simply not in place for a major bear market.<\/p>\n

Morgan Stanley chief investment strategist David Darst, whose book The Art of Asset Allocation<\/a><\/i><\/strong> I keep next to my desk, recently listed his \u201cbear market checklist<\/a>\u201d of things to look for.\u00a0 And by his estimation\u2014as well as mine\u2014none are showing signs of warning:<\/p>\n

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  1. Is the Fed tightening monetary policy?\u00a0 No, they are actively debating more stimulus.<\/li>\n
  2. Are stock price valuations stretched?\u00a0 Hardly; they are slightly below long-term averages.<\/li>\n
  3. Is investor euphoria present? Not that I can see; most investors I meet are underinvested in equities and overly heavy in cash.<\/li>\n
  4. Are bond spreads widening?\u00a0 No, and some risky bond sectors have yields at or near all-time lows.<\/li>\n
  5. Is there a recession looming? This is more complex; in the U.S., the answer is \u201cprobably not.\u201d\u00a0 In Europe, the answer is \u201cprobably,\u201d though both the U.S. and Europe have been in what I call a long \u201cslow motion\u201d recession since 2008.<\/li>\n
  6. Are cyclical sectors retreating?\u00a0 Actually, they have lagged all year and are just now showing signs of life.<\/li>\n<\/ol>\n

    Of course, Darst\u2019s list is very U.S.-centric and doesn\u2019t take into account developments in Japan, China or Europe.\u00a0 Japan concerns me\u2014a lot\u2014and I expect it to suffer a 2008-caliber blowup within the next few years.\u00a0 But for now, Japan actually appears to be showing signs of life for the first time in a very long time.\u00a0 China is slowing, but it is also undergoing a transformation into a more consumer-driven economy; the jury is still out as to what this means for the global economy.<\/p>\n

    And Europe?\u00a0 For the best gauge of what\u2019s happening in Europe, check out Spanish bond yields<\/a><\/strong>.\u00a0 Since the beginning of the year, the 10-year yield has slipped from over 5% to just barely over 4%, and the downtrend remains firmly in place.\u00a0 Bond investors are clearly warming to the country that is viewed most at risk of \u201cblowing up\u201d the Eurozone.<\/p>\n

    The Spanish private sector is still is deep recession, and small and medium sized businesses are being starved of the capital they need by a zombie domestic banking sector.\u00a0 These are problems that are not going away tomorrow.\u00a0 But judging by the reaction of the bond market, they are problems that are known and under control.<\/p>\n

    My advice?\u00a0 Stay invested.\u00a0 If you\u2019re nervous, rebalance your portfolio and take some small profits.\u00a0 But maintain an aggressive portfolio, and if you\u2019re adventurous add some European exposure.\u00a0 My favorite ways to play Europe today are via the iShares MSCI Spain (NYSE:EWP<\/a>)<\/b> and iShares MSCI France (NYSE:EWQ<\/a>)<\/b> ETFs.\u00a0 I hold both in my Tactical ETF portfolio.<\/p>\n

    Plan on holding for the remainder of 2013, or until something significantly changes in the checklist above. I would recommend something along the lines of a 15-20% trailing stop.<\/p>\n

    The article first appeared on TraderPlanet<\/a>.<\/p>\n

    SUBSCRIBE\u00a0<\/a><\/strong>to\u00a0Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

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