Dated: October 8, 2013
Facing the uncertainty of raising the debt ceiling, the Dow Jones Industrial Average has recently retreated to about 15,000, as investors debate whether this is the time to take money off the table or to take advantage of the buying opportunities. Personally, I believe that a bull run is just around the corner, starting as early as December, or at the latest, January of next year. My reasoning is as follows:
1. The politicians in Washington recognize the dire consequences of not raising the national debt ceiling, and few are inclined to endure the wrath of voters if the national debt is allowed to default. Somehow, they will find a way to avert the crisis in the eleventh hour, despite their endless bickering and posturing to show their constituents that they are doing their darndest to protect their ideology. Whatever effects this uncertainty may have on the market will quickly dissipate, and when that happens, the market is going to gain further momentum to the upside.
2. The worry about China’s economy a few months ago seems rather unfounded now. Housing in America, a vitally important segment of the economy, is on the fast track to recovery. It is recovering despite the hiccups caused by a sudden surge of interest rates when the Federal Reserve spooked the market this last May by suggesting that an early tapering of the bond-buying program was imminent. When most Wall Street pundits expected tapering from the Fed last month, it did not happen, resulting in a drop of interest rates. In all likelihood, housing should continue to do well, albeit at a less feverish pace. Economic conditions in Europe are on the mend and should accelerate in 2014. When the world’s three largest economies—the United States, China, and Europe—all perform well in synchrony, the market should have no way to go but up.
My predictions: the Dow Jones index can easily reach 16,500 before 2014 is over, more likely before July, and it could go as high as 17,000. When the market moves, it can move fast. So be prepared to catch the train before it leaves the station. It is time to seriously consider investing in equity, before the end of 2013.
The Encierro is a well-known Spanish festival where thrill-seekers run in front of raging bulls in the streets of Pamplona. This is an exciting but dangerous sport with little financial gain. The American Encierro, i.e., the running of the bulls in Wall Street, is quite another matter, especially if one runs far ahead of the bulls, long before the market begins to rally in earnest. This game is going to be safe but just as exciting as the Encierro, and highly profitable. The ideal time to play it is before everyone realizes that the bull run is taking place.
When the market begins to shoot up again, the financial, industrial, technology, and material sectors will benefit the most.