The aging bull market has plenty of legs left.
At least that’s how a panel of local investment advisers see it.
While the bull market now is the second-longest on record, the combination of deep tax cuts, subdued inflation and continued economic growth should keep stock prices rising throughout 2018, the advisers said.
After the market soared in 2017, the advisers expect a return to more normal returns in 2018, with the Dow Jones Industrial Average rising by about 8 percent and the Nasdaq composite index gaining about 9 percent.
“If you could dream up a whole bunch of things that could drive a bull market, we have then,” said Jeremy Briggs Beck, the president of Anvil Investment Partners, a Buffalo money management firm.
Consumer confidence is strong. Corporate revenues are growing. The economy is steadily strengthening. And the promise of a tax cut could provide further stimulus.
The one thing that isn’t on the stock market’s side is time. Stocks have been rallying since the market bottomed out in March 2009 – a stretch of nearly nine years, making this one of the longest.
“Then it bumps up against the fact that this bull market has been going on for so darn long,” said Beck.
The current bull market, defined by prices that continue rising without being interrupted by a 20 percent decline, is second in length only to the 113-month rally that ran from October 1990 through March 2000 before it collapsed in the dot-com bust.
“Love him or hate him, President Trump is the first pro-business president since Reagan,” said Gerald T. Cole, the managing partner at Arbor Capital Management in Amherst. “This sea change has energized many entrepreneurs and overall economic activity will benefit.”
Kevin E. McKenna
President, Main Line Capital Management
2018 Dow forecast: Up 6 percent
2018 Nasdaq forecast: Up 8 percent
Why the market will rise: “Repatriation of cash held outside the U.S. and lower corporate tax rates will continue to drive positive earnings results. 2018 should provide additional opportunistic corrections to buy securities that are currently priced to perfection – but inevitably miss their lofty expectations.”
Watch out for: “Meeting high expectations and delivering the continued growth in earnings desired is my greatest fear. The earnings push needed to support the valuation of the mega-cap side of the market is quickly becoming herculean.”
Cynthia E. Vance
Managing member, Jensen, Marks, Langer & Vance
2018 Dow forecast: Up 8.8 percent
2018 Nasdaq forecast: Up 10.9 percent
Why the market will rise: “With a few exceptions, the global economy is now firing on all cylinders. With full employment, low interest rates, price stability, an accommodative Fed, tax reform and improving global economic growth, we would expect another year of positive stock market performance.”
Watch out for: “Our main concerns are the stretched stock market valuations, the usual Washington dysfunction and global instability. The question is, with almost a nine year bull market that began in March 2009, how much longer can this last? We think still a little while longer.”
Jeremy B. Beck
President, Anvil Investment Partners
2018 Dow forecast: Up 7 percent
2018 Nasdaq forecast: Up 10.4 percent
Why the market will rise: “Investors are experiencing a nearly unprecedented surge in equity prices without any accompanying volatility. Adopt a more conservative approach by harvesting gains and reallocating more aggressive investments to those that contain some defensive posture.”
Watch out for: “My general thesis has been politics have been more important than economic fundamentals or market technicals as determiners of market performance. Should a conviction arise out of any of the multiple investigations occupying Washington, the market could react quite violently.”
President, Cornell Capital Management
2018 Dow forecast: Up 8 percent
2018 Nasdaq forecast: Up 11 percent
Why the market will rise: "Tax reform and continued work on both infrastructure and health care in 2018 will pave the way for an extension of the bull market.” More interest rate increases by the Federal Reserve won’t be a drag on stocks.
Watch out for: “A geopolitical crisis is one of the biggest threats to the U.S. stock market at this time. With rouge states like North Korea and Iran in possession or in the late development stage of intercontinental and/or suitcase nuclear weapons, everything can change in a heartbeat.”
Advisor, Dopkins Wealth Management
2018 Dow forecast: Up 4.8 percent
2018 Nasdaq forecast: Up 6 percent
Why the market will rise: “We tilt our client portfolios toward [small company stocks]. While they lagged the S&P this year, that only improves their expected return in 2018. Further, we believe the tax legislation will benefit small companies which, on a relative basis, are more impacted by taxes than mega-sized companies.”
Watch out for: “What hurts investors the most is overreacting to what might happen in the future. It has been said that in times of crisis, stock shares return to their rightful owners,” Bohen said. Investors should “plan for the long term and stick to their plan.”
Managing partner, Sandhill Investment Management
2018 Dow forecast: Up 8 percent
2018 Nasdaq forecast: Up 4 percent
Why the market will rise: “The most important factor is the syncing of global economies. Eight of the 10 biggest global economies are growing. I think that can have a pretty powerful impact.”
Watch out for: “Rising interest rates, but more importantly, we’re starting to see a whiff of inflation. Do we get some price inflation that pushes rates up faster than we expected?”
Executive vice president, Courier Capital Corp.
2018 Dow forecast: Up 4 percent
2018 Nasdaq forecast: Up 2 percent
Why the market will rise: Lower taxes will lead to about a 10 percent increase in profits. Plus added spending on infrastructure will bolster the economy.
Watch out for: The Federal Reserve Board will raise interest rates gradually. The economy is almost at full employment, which could spur inflation. Plus there’s political risk. “What’s North Korea going to do?”
Anthony J. Ogorek
President, Ogorek Wealth Management
2018 Dow forecast: Up 9 percent
2018 Nasdaq forecast: Up 13 percent
Why the market will rise: “Earning outlook remains positive, aided by double-barreled tax relief in 2018. Broad-based global economic expansion continues, benefiting large U.S. multinationals in particular. Continued easy-money policies from global central banks, keeping interest rates at below Great Recession levels."
Watch out for: “Conflict with North Korea and/or Iran. Political risks to Trump and/or the Republican agenda, such as Democrats winning control of House or Senate in 2018, or bombshell revelations by special counsel Robert Mueller. Tax cuts over-stimulate the economy forcing the Fed to raise interest rates faster than expected to contain rising inflation.”
Gerald T. Cole
Managing director, Arbor Capital Management
2018 Dow forecast: Up 15 percent
2018 Nasdaq forecast: Up 20 percent
Why the market will rise: Lower corporate taxes will boost earnings. “This is a tide that raises all ships,” Cole said. The economy should grow faster, with more companies buying back stock and increased merger activity.
Watch out for: “Some of the positives are already baked in. Any perceived hesitation could lead to a 5 percent to 10 percent correction.” As the economy improves, interest rates will rise, putting downward pressure on price-to-earnings multiples.