The stock market has enjoyed quite a run since Election Day. But even before Donald Trump surprised the world and won the U.S. presidency, stocks were on an epic run that began in March 2009 at the depths of the Great Financial Crisis. The most impressive aspect of this bull market is that it defied the worst economic recovery in the last century and survived eight years of Obama administration policies that were hostile to economic growth and markets.
Rather than building on a solid economic foundation, the bull market benefited from zero interest rates, lower corporate tax payments, wage suppression and financial engineering in the form of epic levels of debt-funded M&A, stock buybacks and dividend increases. These factors have little if anything to do with the fundamental financial condition of American corporations.
Eight years later, this leaves the markets (which really means the individual companies comprising it) overvalued and overindebted.
The only important question for investors, however, is not where the market has been but where it is going. The answer to that question lies in whether the serious valuation, growth and debt headwinds facing stocks are more powerful than a set of structural forces that developed over the past two decades that pushed stock prices to extremely high valuation levels today – as high as we’ve seen in the last one hundred years.
Here’s why we’re being inexorably sucked into a bull market right now.
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