Tags: Teflon | bull | market | policies

The 'Teflon Bull' Market Powers On, But Is It Truly Unstoppable?

By John Morgan   |   Monday, 21 Oct 2013 08:24 AM

The current stock market rally — a "Teflon bull," as USA Today calls it — seems unstoppable, as it thunders over one obstacle after another in a relentless path upward. No problems seem to stick to it for very long.

With Friday's record close of 1744.50, the S&P 500 is up more than 150 percent since the bull market began in March 2009.

Even the obstacles themselves have become bullish in the odd market psychology that drives Wall Street.

Editor’s Note:
5 Reasons Stocks Will Collapse . . .

Because of various signs of economic weakness, the Federal Reserve's easy money policies are unlikely to be removed in the short term, according to Chris Bouffard, chief investment officer at The Mutual Fund Store, and those policies only help the rally keep going.

"It means the liquidity playbook remains viable and risk assets like stocks will continue to have a tailwind," he told USA Today.

The newspaper noted that in 2013 alone, the stock market has shrugged off potential U.S. debt default, a government shutdown, tax hikes, federal spending cuts, interest rate spikes and the threat of a war with Syria.

Ed Yardeni, chief investment strategist at Yardeni Research, is not so complacent. In his blog, he noted the current economic expansion has been one of the weakest ever in terms of GDP, jobs and capital spending, even while corporate profits have soared.

"In any event, maybe now we should fear that we have nothing to fear for the next few months. My concern is that the bears have stopped growling. The immediate risk is a melt-up in stock prices as investors overcome their trauma."

According to BCA Research, the macro-economic picture is a bright one. The firm, whose prognostications are followed by bank analysts, concludes Bloomberg consensus expectations of 2.6 percent GDP growth next year are too pessimistic.

"The bottom line is that growth is likely to surprise on the upside and will be supportive of risk asset prices in 2014," BCA predicted on its blog.

But The Fiscal Times said the second-half 2013 economic recovery that many economists predicted at the start of the year now seems unattainable.

The Times said revenue growth is missing, as evidenced last week when some bellwether companies, including IBM, Goldman Sachs, eBay and UnitedHealth Group, saw their stocks slump sharply after reporting revenue declines or shortfalls.

"That's an issue because it means companies have to continue to try to squeeze out earnings growth by cutting costs, and it's a warning about just how significant a toll the [government] shutdown may end up taking on corporate profits," The Times reported.

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

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