By John Persinos
"You are entitled to your opinion. But you are not entitled to your own facts."
Those words were uttered by the late U.S. Senator Daniel Patrick Moynihan (D-NY), whose intellectual honesty often annoyed partisans in both parties. Many liberals and conservatives hated Moynihan, so he must have been doing something right. Let's look at the markets today, in the free-thinking spirit of Pat Moynihan.
I've been receiving correspondence lately from readers who are terrified about the current investment climate. Considering the media negativity that bombards them everyday, I can't blame them for being worried. However, this fearmongering is disconnected from reality. Welcome to the "post-truth" world.
The fact is, underlying conditions right now are bullish. The U.S. and global economies are bouncing back, unemployment is falling across most developed countries, S&P 500 corporate earnings are posting robust year-over-year growth, and the accelerating pace of vaccinations is reducing coronavirus caseloads around the world.
What's more, the U.S. Congress is on the verge of approving another round of significant fiscal stimulus that not only addresses unmet national needs but also pleases Wall Street.
Read This Story: The Next Big Catalyst for Stocks
Another encouraging fact is the red-hot housing market.
Home price growth in the U.S. soared in April at a torrid pace not witnessed in more than three decades. Standard & Poor's reported Tuesday that its S&P CoreLogic Case-Shiller national home price index posted a 14.6% annual gain in April, up from 13.3% in March. That represented the 11th consecutive month of rising prices.
S&P CoreLogic Case-Shiller's 20-City Composite notched a 14.9% annual gain, up from 13.4% in March, surpassing the consensus expectation of a 14.7% annual gain. Housing prices in all 20 cities rose.
A home is still the biggest asset of most Americans and remains integral to consumer confidence. When the housing market prospers, people feel wealthier. This "wealth effect" fuels economic expansion (see chart).
The long-running stock market rally continues to prove the naysayers wrong. On Tuesday, the Dow Jones Industrial Average rose 8.99 points (+0.03%), the S&P 500 increased 1.19 points (+0.03%), and the tech-oriented NASDAQ climbed 27.83 points (+0.19%). In pre-market futures contracts Wednesday, the three indices were little changed.
Do the math…
So why is doom-and-gloom pervasive among many investors? In large part, it's because of the tendency of cable media to pursue ratings (and advertiser profits) by pandering to the worst instincts of viewers. Fear sells.
It's even worse in social media, whereby users can get trapped in a collective informational bubble. In a world of algorithms, spin, disinformation, and outright lies, the "truth" hardly stands a chance.
For example, it's easy for a pseudo-economist with a partisan axe to grind to warn on cable TV of 1970s-style inflation to get viewers all riled up, even though there's no evidence that we'll soon see sustained runaway price increases. Meanwhile, genuine economists (you know, people with PhDs who actually teach economics at universities) are in general agreement that inflationary spikes this year should prove transitory.
Remember all the hullabaloo about soaring lumber prices? Here's another fact for you: Those pandemic-caused supply chain distortions in the forestry industry are getting ironed out. Saw mills are busy again. Lumber prices have plunged.
The Bureau of Economic Analysis currently expects U.S. gross domestic product in the second quarter to grow at a pace of 10%, with growth for 2021 to come in between 6% and 7%. The latest consensus estimates for year-over-year earnings growth for the S&P 500 in Q2 is 61.1%. Stock prices reflect future earnings growth. Do the math. The bull market has plenty of fuel left.
If you're a Republican who dumped stocks because Democrat Obama won the presidency in 2008, you missed the greatest bull market in history. If you're a Democrat who dumped stocks because Republican Trump won in 2016, you likewise missed a long powerful rally. If you're a Republican who in 2020…well, you get the idea. The market is an economic barometer, not a political one. Stocks move according to fundamentals.
A smart bet on growth...
Under the bullish conditions that I've just described, It makes sense for investors right how to increase exposure to commodities. The world is clamoring for vital raw materials, such as copper, zinc, lithium, and rare earth minerals. As economic growth gathers steam in 2021, these commodities should continue soaring in price.
I'm particularly keen on copper. The industrial world can't function without the "red metal." Copper is vital for building construction, power generation and transmission, electronics, industrial machinery, and transportation vehicles. Copper wiring and plumbing are mainstays of heating and cooling systems, appliances, and telecommunications links.
This year, as the world economy resumes growth and infrastructure spending explodes, so will demand for copper. For our favorite investment play on this crucial commodity, click here now.
John Persinos is the editorial director of Investing Daily. Send questions and comments to: mailbag@investingdaily.com. To subscribe to his video channel, follow this link.
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