George Leong writes: A soft jobs reading came out last Tuesday, and the stock market…soared? That’s right. Initially, I was a bit taken aback by the surge, but then again, the buying was driven by the optimism surrounding soft economic growth—because that means the Federal Reserve can justify its continuance of cheap money and the stock market stays at its highs. (You’d be a fool to think the buying was driven by sound economic and corporate growth—even if that is the first lesson in Economics 101.)

My sense is the Federal Reserve will most likely refrain from any tapering of its bond buying until early 2014, when the new Fed chairman, Janet Yellen, takes over. She’s also accommodative towards the printing of cheap money.

And that’s exactly what the stock market wants. Without all of this so-called monetary “cocaine,” I doubt the stock market would have moved this high.

But investors need to be wary. The stock market is warped now in its thinking and the continued dependence on cheap money is ridiculous. The stock market needs a stronger economic recovery, more job creation, and much better revenue growth from companies, which remains problematic.

However, in spite of the absence of these fundamental factors, the stock market will likely continue to edge higher, partly due to the continued lack of alternative investments. With the 10-year bond yield down at 2.49%, the bond market is a cesspool for your capital. Heck, you can make that in a day on the stock market at the rate it’s moving! Investors realize this and will likely continue driving cheap money into stocks and pushing equities higher.

Again, this is great for investors, but you have to think about how it will negatively impact the financial soundness of America going forward, especially as interest rates begin to ratchet higher. The amount of debt being carried by the government and Fed is massive. We could be headed towards a financial tsunami down the road that will really hinder America’s ability to grow and retain its spot as the top economic powerhouse in the world, especially with China sitting squarely in America’s rear-view mirror.

So enjoy the ride and make your money now. It’s not going to last forever, as we are into the fifth year of the current bull market that is showing some signs of fading on the horizon.

Be on the lookout for this and make sure you have an exit strategy in place.

This article Five-Year Bull Market Run Showing Signs of Fading? Was originally published at Investment Contrarians

By George Leong, BA, B. Comm.
www.investmentcontrarians.com

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

George Leong, B. Comm. is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services. See George Leong Article Archives

Copyright © 2013 Investment Contrarians- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Investment Contrarians Archive

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.