End Of Year Rally And Multiyear Boom
Zacks Investment Research | Nov 17, 2021 01:30AM ET
With Q4 GDP expected to accelerate into the end of the year, stocks are poised for a strong end-of-year rally.
And with November and December typically being strong months for stocks, it looks like there’s a lot more upside to go.
But the gains don’t have to stop there, as we could be on the verge of a multiyear boom.
Companies are reporting record earnings, banks are the strongest they’ve been in years, while household income has been on the rise.
And with more jobs available than there are unemployed people to fill them, the jobs market is expected to stay hot for a long, long time.
Then add in the trillions in economic stimulus already deployed, and another $1.2 trillion in infrastructure spending that will soon be injected into the economy (not to mention the possibility of trillions more in other domestic spending), and you’ve got a recipe for explosive economic growth and stock market gains.
As Jamie Dimon said in his annual letter to shareholders earlier this year, “This boom could easily run into 2023 because all the spending could extend well into 2023.”
New Highs Beget Higher Highs
With stocks trading at or near their all-time highs, I know some people are wary of buying at these levels.
For some, there is a reluctance to buy stocks after making new highs. I suppose they may feel like they missed the move, or that now stocks have more room to fall.
But statistically, this is just not true.
For one, the S&P, for example, has made 70 new highs this year alone.
Can you imagine all of the money you would have left on the table if you were afraid to get into stocks making new highs?
But second, and more importantly, studies have shown that stocks making new highs have a tendency of making even higher highs.
In fact, using S&P price data going all the way back to the 1950’s, it shows that stocks typically go up in the subsequent six months following new all-time highs.
This means that stocks making new highs aren’t at any greater risk of going down. Quite the contrary, there’s a higher probability of stocks going up even further!
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