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Neil Hennessy: Equities Head Back To The Early 1980s!

TedTed
in Fund Discussions
FYI: Neil Hennessy is bullish on the U.S. stock market.

Hennessy, who predicts that the Dow will hit 20,000 by the middle of 2017, is the president, CIO and portfolio manager of Hennessy Funds, which has some 16 funds and some $6.5 billion in assets under management. Indeed, barring a catastrophe such as another terrorist attack that could disrupt the U.S. economy, Hennessy predicted a continuance of the bull market, which some market observers believe is now long in the tooth.
Regards,
Ted
http://www.fa-mag.com/news/back-to-the-early-1980s-30343.html?print

Comments

  • LewisBraham
    At the beginning of the 1982 bull market, the Shiller P/E was 7.7. Today it is 25.8:
    multpl.com/table
    That gets us to 1998 at best. A similar result occurs even if you use the ordinary trailing twelve-month p/e ratio:
    macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart
  • JohnChisum
    The markets endured a year and a half of sideways movement. I could see them perking up here if the quality of the labor market improves. In addition the promise of lower cap gains tax and more money in consumer's hands to spend with is enticing to say the least.
  • hank
    edited December 2016
    Having trouble getting my head around this. Psychologically, it feels more like '82 - as I think up until now there's been a lot of risk aversion among the retail investor class as in the 70s. But, as Lewis points out, P/Es don't support that. Seems to me markets are sensing some significant inflation (which would reduce the real value of stocks). But my Social Security check the past several years (0% inflation adjustment) doesn't support that.

    Another interesting comparison: The NASDAQ Composite peaked at a high of 5132.52 (and a closing price of 5048.62) on March 10, 2000. (Wikipedia). Today, nearly 17 years later, it's at 5400 (5% higher).*

    Buy, Sell, Hold? Fortunately, at an age where I'm pretty conservatively positioned. Such decisions amount to nickels & dimes (maybe quarters under really nasty circumstances). Not losing much sleep. For a more aggressive/active investor there's plenty to worry about.
    -
    (footnote)* Anybody out there still using a 17-year old computer from 2000? Must work really swell.:)
  • LewisBraham
    edited December 2016
    The other factor that makes utterly no sense to Hennessy's argument is that in the 1980s interest rates were very high and falling, which causes stocks to rise each time there's a rate cut. Today rates are very low and if not rising certainly have not much room to fall. In other words, the market environment today is completely different from the 1980s. I could see stocks potentially rising in 2017, but the idea that we're in the beginning or just the middle of some grand bull market after eight pretty strong years seems absurd.
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