Reasons to Give Thanks

Investing in stock markets often gives us reasons to be thankful ... and occasionally gives us indigestion—not unlike the experience many undoubtedly have with the traditional Thanksgiving meal. Overall, though, we’d suggest there’s far more to be thankful for than not, even during what most consider a more challenging environment.

So without further ado, here is the MarketMinder Editorial Staff’s annual list of things we’re thankful for (in no particular order):

• An ongoing bull market: Since their March 9, 2009, low, markets have risen globally, powering a strong, though often under-appreciated and occasionally entirely overlooked, bull market. As we’ve articulated before, we expect the bull market to continue running into 2013 and beyond, aided by some of the factors that follow.
• Gridlock. The election’s in the rearview mirror (something else to be thankful for, no?), providing markets added clarity—something markets always prefer to uncertainty. And the outcome was effectively the status quo, i.e., gridlock. While gridlock can be frustrating to us as individuals (much like Aunt Betty’s incessant talking during Turkey Day’s football games), markets understand it means the likelihood of relatively extreme legislation decreases rather dramatically. Which isn’t to say nothing happens: As we’ve discussed, we think it likely politicians ultimately find a way to compromise on the so-called fiscal cliff—but any legislation passed between now and 2014’s midterms will require some consensus across the aisle.
• Which brings us to another source of gratitude: 2014 midterms. Yes, they’re two years out, but given structural realities (Democrats have far more seats up for re-election in the Senate than do the Republicans), we’re likely to see more moderation than many presume as those Democrats in traditionally Republican states attempt to gain as many independent and moderate votes as possible. And all told, that also helps with the whole extreme legislation issue.
• Free trade continues its advance. Yes, there have been some squabbles this year—China and the EU, China and the US, the US and the EU, etc. But overall, countries have continued working toward increasingly free trade, and now it seems China, Japan and South Korea may also set aside their recent differences to return to the negotiating table. Overall, the freer the trade, the better off we all are.
• Overall corporate health. Corporations are and have been quite strong for some time now. Though Q3 has seen moderating corporate earnings, that’s not unusual—as a bull market progresses, comparables become increasingly difficult to beat. It’s not uncommon to see even a quarter or two of negative earnings growth before they recover and continue their overall upward trajectory. Combined with things like near-record capital expenditures and near-all time high corporate profits, the US private sector continues exhibiting considerable relative strength.
• Improving unemployment. Though it’s lagged economic growth and most would undoubtedly prefer faster gains, unemployment’s continued its overall downward trajectory in fits and starts. As economic growth continues, we’d expect that trend to continue.
• Overall skeptical sentiment. Sir John Templeton famously said, “Bull markets are born in pessimism, grow on skepticism, mature on optimism and die of euphoria.” A superficial glance at most newspapers and media outlets would suggest sentiment is somewhere between skepticism and optimism—a positive sign arguing for the continuation of the bull ahead as it’s exceedingly rare to see a bear market start when investors are mostly skeptical.
• Capitalism! An immeasurable force for global good and the holiest “–ism” of them all.

Happy Thanksgiving from the MarketMinder Editorial Staff!