Trend: Global investors are putting their money in the US stock market, driving prices higher.
Gary Halbert in InvestorsInsight : Forecasts & Trends offers his opinion about why the US stock market continues upward, in spite of negativity on many fronts. Excerpts below.
It is easy to be a skeptic of the US stock markets. For many of us, quite honestly, it is always easier to be a skeptic of the investment markets than to be a cheerleader like the always-bullish Wall Street types. But market skeptics have left a huge amount of money on the table for the last 20+ years, watching and waiting for the market to tank.
Now, here we are in 2007, with the Dow Jones making new high after new high, and yet with all the problems we see, I am still encouraging you to get off the sidelines and get onboard, especially with the professional money managers and strategies I recommend. Why? Let me explain, as succinctly as I can.
The world is awash in liquidity, especially in Asia and the oil-producing nations. I have discussed this in the past. Unheralded amounts of money are looking for a place to invest. If you are a foreign investor, is there anywhere safer to invest than in the USA? NO. So, you invest in the US, and where better to invest than the US equity markets?
We can talk about all the problems the US is likely to encounter in the next 5-10 years; we can talk about economic and financial crisis scenarios that could develop; we can talk about social/political/moral issues; etc., etc. We like to talk about these issues, and we should.
But if you are a wealthy Asian, and you need to diversify your investment portfolio, the United States looks very safe and very good. End of story. You get some of your money invested in the US equity markets which have a long history of good returns over time.
The point is, the US equity markets are being driven higher in part by the unprecedented demand for investments in the US. Sophisticated investors around the world are looking to diversify their portfolios, and the US equity markets are increasingly attractive.
What this should point out to us, as investors, is that things have changed. Old models don't work the same anymore. Some of the market equations we learned years ago don't work so well these days. Things have changed!
To give you one example, when I cut my teeth in the investment markets, "P/E" ratios and similar indicators were the gold standard. Just not true anymore. P/E ratios have been out of whack (ie - too high) for years, yet the equity indexes just move to new high after new high. Something else is going on, as I have suggested above.