After a bloody first month of the year for investors, even the most die-hard bulls are starting to question the veracity of their convictions. Those concerned about the market should consider a few data points:
First off, the domestic economy is growing. U.S. GDP grew at a 3.2% annual rate, which, combined with Q3, made for the best second half since 2003. Improvements in consumer spending and trade are especially notable.
Likewise, troubles in emerging markets are likely to be self-contained. These economies are facing a host of real-world risks, including inflation, currency volatility and unstable governments. It’s different in the U.S. I’m not sure that most consumers even care about the taper, as they are likely concentrating on rock-bottom interest rates and a revived housing market.
There is tons of cash on the sidelines, even after last year’s epic flows into equity funds. So what choice do investors have? CDs and money markets have a nil return, and foreign bourses are just too scary. It’s time to recommit to U.S. stocks.