Last week the Dow Jones notched another milestone, breaking through 26,000.
These thousand-point rises have become something of a rapid and regular occurrence since Donald Trump became president, but not everyone is pleased.
To naysayers, this is an unloved, unexpected stock market rally, and it is making them miserable. But partisan economists and analysts need to take note that a strong market doesn’t necessarily mean that it is expensive.
It would be inaccurate to call today’s stock market cheap, but it is in no way overpriced.
Skeptics will counter: “How can you say 18 times this year’s earnings is not expensive?”
It’s the economy, silly.
There are fundamental positives driving the stock market rally, and for the most part, they are not understood.
After the financial crisis, many took their money out of stocks, which was exactly the wrong time — when the Dow was below 6,500.
So as the economy improves and people feel more secure, they will gradually come in off the sidelines.
Post-crisis, during the President Obama years, the economy averaged a 1.6 percent gross domestic product growth, even with 0 percent interest rates.
Under Trump, the economy will likely post three consecutive quarters of 3-plus percent growth. The Atlanta Federal Reserve’s GDPNow model has Q4 coming in at a hot 3.4 percent growth.
That’s quite a difference in economic fundamentals. These figures alone could make today’s market actually cheap.
Remember all the dopey “economists” and “strategists” who predicted that when interest rates went up, the stock market would crack?
Well, these doorknobs — the same theoreticians who predicted Trump would cause an economic crash — got it wrong again.
Will there be corrections along the way? Sure, but the trend is up.
You see, it’s not politics, it’s just math.
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