In early January, I predicted a bull market for stocks this year. From the Union Tribune
The bulls weren’t bullish enough.
The stock market just had its best first quarter in 14 years. The surge has sent Wall Street analysts, some of whose forecasts seemed too sunny three months ago, scrambling to raise their estimates for the year.
“That it’s up isn’t surprising. It’s the magnitude,” said Robert Doll, the chief equity investment manager at BlackRock, the world’s biggest money manager.
P/E ratios are low and consumption is down. If people are paying only $10 for every $1 of earnings now, think what will happen as higher sales increase profits (GM and Ford, for instance, are now retooled to become profitable at much lower production volumes than before) at the same time that optimism drives P/E ratios up. A rise in profits of, say, 20% coupled with a rise in P/E from about 11 to, say, 15 could mean a rise in indices in the tens of percent.There is other good news that suggests that this gain in market indices is not a bubble. Multifactor productivity is up by a record amount. (This measures how much we're actually producing in value with labor and capital, the ultimate, most important measure of whether we can sustain profits and wages.) And consumption, too, is up the most in seven months. (Consumption is 70% of GDP and thus the biggest driver of GDP growth and all that comes with it.)
I don't think that the gains are done yet. I'm still bullish.