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Published: September 1, 2009
There's no question that the past
year-and-a-half has been disastrous for investors. Since last
March, the S&P 500 has lost nearly a quarter of its values, and
many are still too scared to put their money back in the market.
But according to some of the best investors in the world, now is
exactly when you should turn your eye to stocks...
Super-investor Warren Buffet once said that his investment
philosophy was to buy stocks when others were fearful, and to be
fearful when others were buying. Right now isn't the time to be
fearful along with the herd; it's time to stock up on stocks.
As I predicted earlier in the year, right now the market is
zooming higher like there's no tomorrow.
Let's begin with this chart of the S&P 500, a good proxy for the
broader U.S. stock market...
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As you can see, shares of U.S. companies have
been soaring. In fact, from a low of 667 on March 6 to a recent
high of 1033, the market is up a mind-boggling 366 points.
Translation: U.S. stocks have improved a whopping 54.9% in just
a matter of months.
The fact is the market made positive moves long before the
economy was showing a ton of life. And if you don't jump in
early, you're likely to miss the best moves.
And now, with the 960 level for the S&P 500 the top of the
resistance range clearly out of the way, U.S. stocks are now
setting their sights on the next big resistance level of 1313,
set way back in August of last year.
Now, getting there won't be a straight line: 300-plus point
moves don't usually happen like that. So there will likely be
the occasional, healthy pullback along the way.
But there's no doubt: From a technical perspective, the 1313
level on the S&P 500 is the next order of business.
And don't forget: When we make it back to this level, we're
getting very close to the pre-recession highs of 1500-plus.
While that's by no means a done deal, there's little doubt we're
headed in the right direction at a solid pace.
But it's not just the market's technical factors that have me
jazzed. The fundamentals are on the right track, too...
Fundamentals Improving Big Time!
For a while now, I've said that the
housing market got us into this mess
and the housing market will get us
out.
Well, the facts are in: Housing is
beginning to show consistent signs
of life.
Sales of existing single-family
homes jumped 7.2% in July compared
to the month earlier. That's the
largest increase since the National
Association of Realtors began
tracking data way back in 1999.
Plus, it marked the fourth monthly
increase in a row.
In other words, the improvement in
the real estate market isn't just a
flash in the pan. It's here to stay.
But that's not all. Compared to July
2008, home sales were up a solid 5%.
That's the first year-over-year gain
since November 2005. And that means
the real estate market is showing
significant legs, even when dealing
with tough year-ago comparisons.
Another positive: The improvement in
home sales is geographically
broad-based. Take a look at this
chart...
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As you can see, home sales improved across the board during
July. In fact, they're up 13% in the Northeast, 11% in the
Midwest and 7% in the South. Only the West region showed a small
2% decrease.
And it's not just the real estate market that's showing solid
fundamental action. The broader economy is looking good, too.
According to Federal Reserve Chairman Ben Bernanke...
Fears of financial collapse have receded substantially... After
contracting sharply over the past year, economic activity
appears to be leveling out, both in the U.S. and abroad, and the
prospects for a return to growth in the next year appear good.
And he's not alone. According a survey of economists by the Wall
Street Journal, 28 of 45 respondents say the recession is
already behind us, and 16 say it will end by December of this
year.
I don't know about you, but that's a hugely bullish factor to
me. But there's more: GDP forecasts are also on the rise. Take a
look...
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As you can see, economists are calling for a big improvement
in GDP over the next year. In fact, even though GDP contracted
6.4% and 1% in the first and second quarters of this year
respectively, analysts are looking for improvements for next
four consecutive quarters in the 2.1% to 2.8% range.
Bottom-line: Stock prices are zooming higher and are now cleared
to take out levels not seen since August of last year. In
addition, strong fundamental factors including an improving
real estate market, a huge call for an end to the recession and
solid GDP projections are adding solid foundation to more
price surges. And no matter how you slice it, that's positive
for your portfolio.
Best wishes,
-- Wayne Burritt
Editor
Easy Money Options Editor's Note: This
article originally appeared in
Penny Sleuth. |
