From the lowest point in the 2008-09 financial crisis, the S&P 500 has recovered more than 200% of its value. Although there have been bumps along the way, the more than nine year rise in the stock market has mostly occurred without interruption. This leaves many to wonder “where will stocks go from here?”
In a recently published article and accompanying presentation, Jurrien Timmer, Director of Global Macro at Fidelity, describes five possible scenarios for stocks in the coming years and his estimation of the likelihood of each scenario:
Secular Stagnation – More of the same; slow economic growth and low inflation with stocks gradually grinding higher. (Most Likely)
Bond-Proxy Bubble – Low interest rates continue to push yield hungry investors into stocks with high dividend yields, driving stock prices to higher levels. (Less Likely)
De-Globalization – A reversal of the long-standing globalization trend that would hurt corporate profits and stock prices. (Less Likely)
Inflation Boom – Accelerated growth in corporate earnings leading to much higher stock prices. (Least Likely)
Deflation Bust – A global slowdown brought about by a classic earnings recession. (Least Likely)
You can read Timmer’s article and view his presentation here.
We agree with Timmer that the current trend of moderate economic growth and gradually rising prices is the most likely scenario for stocks. We are hopeful that from our current condition, the global economy will eventually accelerate and grow at a faster pace. But we also understand that it is important to consider the less positive possibilities as well. If you would like to discuss our opinions, outlook, or your portfolio in greater detail, we would be happy to schedule a meeting or a conference call at your convenience
Horizon Wealth Advisors is a Houston based fee-only wealth management firm. Horizon is a fiduciary advisor. We specialize in helping successful individuals and families understand, organize, and manage their often complex financial situations. Horizon offers integrated financial planning and investment management services.