What I Am Most Bullish on Right NowMauldin Economics
It feels like sentiment about the coronavirus is starting to change. There’s a new sense of hope where there was little just a month ago.
New drug therapies are being announced and dozens of vaccines are in development. There is a high probability one or more will work by the end of the year. Deployment will be difficult, but doable.
This change in sentiment, combined with generous fiscal support and liquidity injections, is giving investor confidence a boost, too. So, we see stocks rising.
There is reason for hope, and we should celebrate that. But we still haven’t overcome all the reasons for caution.
Looking at it not as an investor, but as an entrepreneur and small business owner, I think some are greatly overestimating how fast the economy can recover. Entire industries, no longer viable in their current forms, must now figure out new ways to do business.
I am bullish on the American entrepreneur. Betting against not only the American entrepreneur, but entrepreneurs worldwide in relatively free-market societies, has always been a losing proposition.
They will figure it out; that’s what entrepreneurs do. But they won’t do it overnight, or even in a few months—nor will they take direct paths from here to there. The rules have changed.
As I wrote two weeks ago, we are in the process of repricing the world. Everything will get repriced; it’s a matter of when and how. Will landlords be forced (by the market) to take lower rents from restaurants? Will the cost of our restaurant food go up? Haircuts? A thousand other things we buy, like stocks?
We see this in the latest Barron’s Big Money Poll of 107 top money managers. Asked to forecast the stock market this year, 39% were bullish, 20% bearish, and 41% neutral.
So adding together the bullish and neutral, eight out of 10 money managers see at least some chance of positive equity returns between now and year-end. They are even more confident for 2021, with 82% bullish and only 4% bearish.
The Barron’s panel has tons of bullish quotes, arguing that things will go back to normal and now is the time to buy. Which is the same thing people said in 2007-’08.
My friend Ed Yardeni is similarly bullish, largely due to Federal Reserve actions. He also thinks analysts will probably overshoot their revenue and earnings estimates to the downside, then revise them upward later in a grandly bullish surprise.
As a natural optimist myself, I admire people who show confidence in tough situations. But I also think recovery will take more than a year or two.
I talk to small business owners and corporate leaders all the time, and they all say it will be a long, hard climb out of this hole.
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Read the full article here By John Mauldin, Mauldin Economics