Wall of Worry? Stay Bullish
11/18/2013 9:00 am EST
We know many investors are skeptical of the stock market. They feel it's gone too high. Others point out it's a manipulated market, being orchestrated by the Fed. Margin debt is too high, and so on, observes Mary Anne and Pamela Aden in The Aden Forecast.
And while many of these factors are true, we have to ignore the chatter and go with what the price action is telling us.
Yes, the stock market is climbing a wall of worry, but that's good—it's normal and it means the speculative phase, which is usually when the biggest gains are made, is still to come.
Plus, the markets couldn't be more bullish. Recently, Nasdaq, the S&P500, the Russell 2000, the Dow Industrials, the Dow Transports, and several of the global stock markets all hit new bull market highs.
In most cases, these were also all-time record highs. Despite the naysayers, it's about as good as it gets.
And despite these gains, generally, good earnings and our technical indicators continue to reinforce that the stock market still has a lot more upside potential.
The Fed's easy money has kept this bull market going since 2009 with its QE stimulus programs. This has been the primary driver for stocks and there's no sign it's going to end any time soon.
Also positive for stocks is they have little competition. In this age of super low interest rates, the stock market is one of the few markets providing good returns.
We know the market's income opportunities may not be fabulous, but they are available. For now, a couple of our recommended stocks yielding over 3% are Microsoft (MSFT), BHP Billiton Ltd. (BHP) and Procter & Gamble (PG).
Meanwhile, the big laggards are still the emerging markets. Hong Kong and Russia provide an example. But many of these markets are very cheap compared to the US market. They're currently priced at real value levels.
So, if the overall stock environment remains bullish, many of these markets could take off in a hurry. Russia, for instance, is probably one of the cheapest markets in the world. And while we're not recommending it, if you don't mind volatility and speculation, it has good potential.
Overall, we're happy with our current recommendations. For new buyers, or those who want to add to your positions, we'd buy the strongest ones, which include the iShares S&P Global Telecommunications ETF (IXP), Merrill Lynch Retail HOLDRS ETF (RTH) and the iShares Dow Jones Transportation ETF (IYT).
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