September 21, 2014


What will make stocks go even higher? (Jesse Solomon, September 21, 2014, CNN Money)

Here's what needs to happen for stocks to climb even higher:

1. A 'not too hot, not too cold' economy: For stocks to keep going up, the Fed has to cooperate and not hike interest rates before investors expect it to, which right now is the summer of 2015.

The Fed is likely to play along if the economy continues moving at a "not too hot, not too cold" rate, according to Jim Russell, Senior Equities Strategist for U.S. Bank Wealth Management.. [...]

2. Real earnings growth: In addition to the Fed, earnings have been the mother's milk of the bull market. Companies are growing their bottom lines, but most of the healthy profits of the past few years have come largely through cost-cutting.

As the overall economic picture gets better, stocks could see a real boost if companies can show that they're actually growing revenue because people are buying more things.

"If the economy continues to improve, I want to see organic top line growth from corporate America," said Robert Landry, a money manager with USAA investments in San Antonio, Texas.

3. Geopolitical stability: Geopolitical risk has been responsible for various market shocks this year, but they have all been short-lived. That trend should continue as long as the these situations don't spin out of control.

4. Immigration amnesty, which would put upward pressure on real estate values

5. Pacific and European trade agreements, which would open new markets and further reduce the cost of imports.

6. Tax reform, reducing the complexity of the current income tax system and getting rid of corporate taxes in particular

7. Corresponding hikes in gas taxes, which would put further downward pressure on gas prices and spur adoption of alternative energy sources

8. Gutting defense spending and returning the money to investment instead of consumption

9. Reforming Obamacare to push more Americans into HSAs, which would increase investment and savings

Posted by at September 21, 2014 8:39 AM

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