In a recent article for Barron’s, veteran investment strategist Byron Wien argues that the current business cycle, although aging, can continue for several more years because the “usual factors that warn of a bear market or recession are not evident.”
An inverted yield curve, investor euphoria and high yield spreads between lower-quality bonds and Treasuries are three such factors. Wien also notes that the Leading Indicator Index is an “important warning signal,” but that it has been rising since 2016 and that, even if it were to “top out, we would still have as long as two years for the market to work its way higher before the downturn begins.”
Wien shares other insights on the bull market’s staying power:
- Strong business activity in both the U.S and globally;
- Inactivity in Washington has been “neutralized” by strong economic performance. Further, Wien writes, “most investors believe that there will be a reduction in corporate taxes by the end of 2017 or early next year and other aspects of Trump’s agenda will be passed in 2018.”
- The market has tempered its fear of the North Korea situation;
- The combination of globalization and technology, says Wien, is suppressing inflation.
Still, says Wien, there are “plenty of other issues to worry about” and “the investment business requires money managers to weigh the variables and make a judgement.”