Remain Calm and Invest On!
I expect plenty of volatility this year, so keep your safety belts securely fastened…
Despite today’s market action, stock investors are in store for more gains this year.
Let’s take a quick look at where we are in the economic cycle right now and you’ll see exactly what I mean.
First, the Fed is at it again! And not just the Fed, but other central banks around the world are expanding their balance sheets like mad once again.
The Federal Reserve alone has pumped $500 billion into the monetary system just since September last year and still has the money supply spigots wide open.
The world’s money supply is growing at an accelerating clip, as you can see above. This chart clearly shows a growing global money supply starting last year, after two years of contraction.
And more easy money sloshing around in the financial system means faster growth and accelerating corporate profits, which should be music to investors’ ears after the 2019 profit slump!
And this has all played out before during the current expansion, as you can see below.
The U.S. economy is enjoying unprecedented growth after the Great Recession in 2008. Our economy has been growing for 11 straight years now.
Overall, U.S. economic growth has averaged a respectable 2.3% clip over the years, but along the way we’ve seen two growth slowdowns — one in 2011 and another in 2016, as you can see above.
Growth slowed to a quarterly low of just 1.3% in 2016 but then accelerated again for eight straight quarters in 2016 and 2017. And guess what? The stock market boomed in 2016 and 2017, up 31% in those two years of rebounding growth!
Now the exact same dynamic is playing out all over again as current quarter GDP is expected to jump to 2.3%, up from just 2.1% last quarter, and away we go again with another growth spurt!
Mark my words, renewed growth means rebounding profits, and that means all those naysayers whining about how overvalued stocks are will be proven dead wrong.
That’s why I’ll be approaching any market pullback this year as a prime buying opportunity, and you should too.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch