In this weekend's edition of Barron's, the weekly publication
points out on the cover of its Market Week section a very curious
and interesting statistic that very well could hold the future of
If history is correct, stocks could have more than 18 percent of
upside from current levels, representing a great way for investors,
especially those still trying to make back losses from the past
five, to lock in some gains.
According to Ned Davis Research, the crash in 2007 was the
exception, not the rule. In fact, in approximately the last dozen
times that stocks have made new highs, they have continued
In fact, the 2.3 percent gain that followed the 132 days after
making new highs for stocks in 2007 may be the most recent memory
of stocks making new highs, but it is surely bucking the trend.
On average, when stocks make new highs, they have tended to keep
going up for 417 days, more than a full calendar year. Thus,
investors could confidently be long through next February if
history is to be learned from. And better for investors is the
median return of these periods for stocks: a whopping 18.4
That's right: 18.4 percent. Given today's level of the S&P
500 right around 1520, this could mean that stocks could rally just
near 1800, representing potential massive gains for those investors
who are set to capitalize on any potential upside.
Look at the fundamentals of this market:
Europe is improving, especially those countries most affected such
as Greece, which is starting to see deposits flow back into the
nation's banks (an incredibly bullish signal);the U.S. economy is
improving as well; large M&A deals are being completed right
and left and the IPO market has seen great activity;Stocks are
within breathing room of record highs; bond yields are beginning to
rise at a measured pace;Global central banks are easing more and
more;Earnings growth seems to be resuming.
All of these are massive positives for the market. Even more
bullish than the rush of M&A activity in recent weeks is the
deals that have not been done.
Take, for example, the proposed takeover of the NASDAQ OMX Group
) by the Carlyle Group (NASDAQ:
). The NASDAQ refused to sell itself only because they wanted a
better valuation at a higher price. Barron's even points out that
the NASDAQ could be worth as much as $54 per share if valued on
Kopin Tan writes that, "a target company holding out for better
offers may be a sign that our economy is strengthening. Will a
strengthening economy swell trading traffic? Big mergers are
ticking up. New listings have increased as stock prices rise and
volatility subsides, and Dealogic says U.S. IPO's have raised $6.03
billion so far this year - 35 percent better than the average since
If the market can get through the budget sequestration, which,
to be honest, is a modest negation of $85 billion from the federal
government's budget, or 0.5 percent of annual GDP growth, the hit
will be noticeable but also manageable and should be reflected in a
one-time impact to the government spending calculation of GDP.
However, the worrisome internal emails leak from Wal-Mart (NYSE:
) last week revealed that the two percent increase in the payroll
tax may be responsible for the company's worst start to a month in
The weak emails at Wal-Mart could point to a broad slowdown in
consumer spending in February or simply a transitional period where
shoppers adjust to new income levels as a result of the higher
taxes. Data released in the beginning of March will bring more
clarity to the state of the consumer in the month.
Either way, if the market can get through these fiscal headwinds
and the underlying private-sector economy remains strong, stocks
could be set to "go postal." S&P 1800? Just maybe...
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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