Market Analysis

Stating the Obvious

Sometimes the most obvious stuff is the least recognized.

Sometimes the most obvious stuff is the least recognized. Obvious things, particularly when they last a long time, end up being taken for granted. Obvious is regular, normal, mundane. Eventually, the obvious gets ignored.

So far, 2007 has been a very obvious, routine kind of year for the global stock bull market.

We've been called crazy for our stock market optimism for 2007. But there's nothing overly "optimistic" about any of the below—these are facts. Obvious facts. It's worth taking stock of them every now and again because the obvious is continually being ignored in today's robust global economy. Yet, the stark results are there for all to see.

• Global economic growth is marching ahead of expectations
• Corporate earnings growth is well ahead of previously lowered expectations
• Long term interest rates remain low globally; liquidity is plentiful
• Global inflation is low
• Merger and acquisition activity is thriving
• Stocks remain very undervalued relative to bonds
• Geopolitical turmoil is downright sedate lately
• Sentiment remains cautious
• Free trade pacts are being struck all over the world, new pro-capitalist leadership carried the recent French elections, and major protectionist legislation remains all talk so far this year
• All major risk factors we can identify are widely known and discussed throughout the financial media (meaning they are already priced in to stocks)

And lastly (but most importantly for our purposes), global stock indexes are up nicely, and some are hitting new all-time highs.

Index Performance, Year-to-Date (as of Friday 5/18)
S&P 500: +8.1%
MSCI World: +9.1%
MSCI EAFE: +9.5%
MSCI Emerging Markets +11.2%

The world is a beautiful place today, yet most seem to be missing that obvious fact. We don't see that changing anytime soon. An environment of great fundamentals and dour sentiment is a wonderful thing for stocks. Obviously, that makes us very excited about what the rest of this year holds.

Source: Thomson Financial Datastream

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.