Market Pulse: Hello Mr. Powell |

Market Pulse: Hello Mr. Powell

David Vomund

Fed chair Powell appeared on “60 Minutes” and the market rallied.

He said the economy is in good shape (it mostly is), inflation is a non-event (check) and he sees no reason to raise interest rates or for that matter to cut them.

I agree with Mr. Powell’s take and so must investors. I key mostly on inflation, which has been below the Fed’s target in part due to the internet’s impact on prices. The record shows that investors also focus on inflation. Since 1950 when the inflation rate was between 1 and 3 percent stocks on average traded for 18.5 times earnings.

In years when inflation was above or below the 1-3 percent range the market’s p-e was closer to 14. A big difference.

The ever-present naysayers in a bull market are inevitably those who missed the early gains and later good times. They say what is happening in the real world (rising prices) shouldn’t be happening. And as prices rise and rise they become ever more strident with talk of a market collapse a la 1929 and another depression without making a case for either.

That the media give them air time or print space once again underscores the fact that “bad news sells.”

The bears are looking in vain for what will trigger lower prices. Some believe they’ve found one. Not a day goes by without my seeing, hearing or reading that economic growth is slowing across the globe. So that’s what will torpedo the bull market, they now say.

Watch out below. Brexit is creating uncertainty for the U.K., as it has for two years, and Germany and Japan are flirting with recessions. The European Central Bank further lowered its outlook for this year and China pared its 2019 growth target to barely 6 percent.

Clearly, the global economy is not humming along. No wonder interest rates aren’t rising.

The acronym TINA (There Is No Alternative) was first used early in the bull market that began 10 years ago, but set aside after stocks rose. In truth, it still applies and is more a factor than GDP growth forecasts about slowing growth or the near-term earnings outlook.

Quality stocks are by far the best of all asset classes over the long term, easily topping bonds, real estate, cash equivalents, commodities and metals. We know that. Even though stocks have been rising for a decade, no other assets have become more attractive.

I can’t make a case for any of the alternatives. None. So for stocks, TINA.

David Vomund is an Incline Village-based fee-only money manager. Information is found at or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.

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