February 26, 2019

“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.”

– H.L. Mencken

The Dow Jones Industrials finally surpassed 26,000 again, after rising for nine straight weeks – the longest weekly winning streak since 1995. On an intra-day basis, that venerable index is up a tantalizing 19.99% in 58 days – from 21,712.53 last December 26 to 26,052.90 on Friday, February 22.  Along the way, we enjoyed the best January in 32 years, and February has defied its historic tendency of being a “letdown” month by rising 4.13% through Friday. NASDAQ is up 21.6% since Christmas, and the small-cap Russell 2000 is up a phenomenal 25.5%. But you wouldn’t know any of this by watching the nightly news.

MRC Business searched Nexis for all ABC, CBS, and NBC transcripts mentioning stocks, stock market, or the Dow between December 1, 2018 and February 15, 2019. They monitored broadcasts of ABC World News Tonight with David Muir, CBS Evening News, and NBC Nightly News with Lester Holt to determine the nature of all their stock coverage. Each news report was categorized as positive if it was about a rising market or negative if it was about the market falling. Result? Negative coverage won by a ratio of 4-to-1.

Some examples: On December 4, the market decline led the Nightly News and Evening News broadcasts. One of the on-screen headlines screamed: BREAKING NEWS: MARKET PLUNGE, with a prominent photo of President Trump next to a declining stock chart. Three days later, on Friday, December 7, all three networks covered another decline, in what CBS called the “worst start to December since 2008.”

Good news didn’t merit much coverage. After the Dow enjoyed its best January since 1987, there was not one second of network coverage. Two weeks later, on February 15, when the Dow rallied over 400 points and completed eight straight rising weeks, not one of the evening news shows mentioned either fact.

Why? Good news is boring and bad news is energizing. Fear generates an adrenalin rush that keeps those eyeballs glued to the TV. MRC noted that negative headlines about a “nosedive,” “meltdown,” or “worst Christmas Eve ever” dominated the December shows, while January’s rapid recovery was almost totally ignored. There is no great interest in “spectacular rebounds,” as dramatic as those words may seem.

There is also the political angle. Presidents get undue credit or blame for the stock market under their watch. A strong market in President Trump’s first year surprised and upset some journalists who consciously or unconsciously wanted to undermine his presidency. When the market finally declined in late 2018, they reported the cataclysm with great zeal and energy, but January’s return to the market’s long-term upward bias has found the three main TV news network suddenly mute on the markets.

No News is Good News

‘Nulla nuova, buona nuova’ (no news, good news) – an old Italian proverb

Lately the market rise has slowed, creating a sense of boredom, or unease. The CBOE Volatility Index (VIX) fell to its lowest average in four months. Bespoke Investment Group – which researches the significance of every day’s market – pointed out how flat the market was in the middle of last week:

“We realize that it has been a holiday-shortened week and everything, but you can’t get much more boring than the last three days of trading.  Heading into the final trading day of the week, the S&P 500 is within one point of where it closed out last week.”

– Bespoke Investment Group, February 22, 2019

This torpor is positive in the sense that it indicates we’re not close to entering a bubble situation. Markets usually die of excesses, not boredom.  The market in late 2017 was more like a bubble. The Dow crossed 23,000 on October 18, then hit 24,000 on November 30, and 25,000 on January 4, 2018. There were no significant corrections along the way. Then, the Dow crossed 26,000 just two weeks later, January 16, 2018. Similarly, it took the S&P only nine trading days to set new all-time highs at 2700, and then 2800.

THAT looked more like a “bubble” to me at the time. My Growth Mail column of January 23, 2018 was titled, “Market Milestones are Falling – Maybe Too Fast.” In that column, I expressed unusual caution:

      “Whoa, Nellie! Maybe it’s time for a breather! Big new barriers usually take some time to digest.”

– From Growth Mail, January 23, 2018

Nothing like that is happening now. January’s recovery was more like a “relief rally” from the extreme negative sentiment in December.  The February slowdown looks like what I foresaw in Growth Mail three weeks ago (February 4, 2019) – it’s neither a correction nor a great new rally, but a “pause that refreshes.”

Today, there aren’t any market bubbles or economic excesses like those that preceded previous crashes – like the commercial real estate bubble (S&L crisis) in 1990, the tech stock dot-com bubble in 1999, then those kinky real estate derivatives in 2007. No single sector is running away in bubble territory now. There’s no bubble in oil, no bubble in global or U.S. GDP growth rates, and no bubble in stock prices.

Technicians predicted an end to this bull market in late October 2018, when the S&P dipped below its support channel (see chart below). The bull seemed truly ended after the market collapse in December, but here we are on the cusp of March with no bear market, and a bull market about to turn 10 years old.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Next week marks this bull market’s 10th birthday. It began on March 6, 2009 on an intraday basis, and on Monday, March 9, 2009 on a closing basis. Along the way, the S&P 500 twice narrowly avoided a 20% correction, first in 2011 (-19.4%) and then last fall (-19.8%). It has not been a smooth ride, but don’t look now: The Dow only needs to rise 800 points (+3%) to reach a new all-time high, a great birthday present.

After the best January since 1987 and the worst December since 1931, we’ve still got some “catching up” to do, since S&P 500 earnings rose 24% in 2018 while the S&P index fell 6.2%. That’s a 30% differential between S&P earnings and price, pushing that index down to a historically normal 16 P/E earnings ratio.

This bull market has also coincided with what will soon be the longest economic expansion in American history. The previous record of 10 years (1991-2001) will be eclipsed if we’re still growing in July 2019, and every indicator points to positive growth in 2019, making 2019 a double 10-year market celebration.

About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. *All content of “Growth Mail” represents the opinion of Gary Alexander*

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