When we look at what the market has done over the last several years, we have to say it has been a nice ride. After the severe market drop that took place from October of 2007 thru February of 2009, the market has been on a steady upward climb. There have been some drops along the way that turned out to be nothing more than good buying opportunities. The last longer drop was a few month period during the spring and summer of 2011 where the market dropped approximately 17 % before starting its long bull run. It wasn’t until spring of 2013 that the market broke the highs that were established way back in October of 2007.
Any time you have a significant run of the market, whether good or bad, you have to point to the underlying fundamentals as the reason for the run. The stock market is a barometer of the economy. In fact, it is considered to be a leading indicator of the economy. The market will turn before the economy turns, good or bad. If you were to consider the economy back in September of 2011, things were not looking good. One of the key discussion points of the presidential election in 2012 was about the economy and how to fix it.
The stock market, at the time of the election, had already been climbing for a year indicating an improving economy on the way. We can clearly see improvements in the economy as unemployment numbers have continued to get better. Housing prices have come back to where they were before the fallout where many homeowners were left upside down in their homes. New construction has climbed, as has consumer confidence.
At the beginning of this New Year, as we look to a continued improving economy, we can expect the bull market to continue. Any dips that occur provide buying opportunities. Until we see otherwise, we look for the bull market to continue because the underlying fundamentals are in place.
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