With the Affordable Care Act (often dubbed Obamacare) creating such a commotion – so much so that it was a key factor in the recent shutdown of many Federal government services – investors might have expected to see share prices fall in the healthcare sector of the stock market. But that hasn’t happened; instead, the reverse has taken place, with the major players in health insurance even outstripping the impressive 25 percent growth logged by the Standard & Poor’s 500 stock index. More significantly, the stock market as a whole has continued its steady climb after the shutdown ended – dumbfounding bulls and bears alike.
Pity the poor analysts. They worry if things appear “too good.” They worry when the market declines. And they grow anxious when a bull rally lasts as long as this one has. The bulls favor seizing the day. And frequently, bulls and bears use the same market data to form widely differing conclusions. Here’s an overview of what’s been happening:
- Some bullish analysts worried that the market was slowing in August and again in late September and braced for a market correction. It hasn’t happened. Many now believe that the Fed’s role has helped keep the momentum going and that this bull market still has legs. Some caution that growth is likely to be moderate. Their hope is that the Federal Reserve will continue its bond-buying program into 2014. In contrast, the bears are concerned that investors are growing complacent, relying too much on the Fed to propel the market forward. They worry about a decline when the Fed begins its “tapering off” phase, and how severe that dip might be.
- Whether they are bulls or bears, many analysts sense that the market is entering a new phase. Small investors are becoming willing to tolerate a little more risk, moving from blue chip dividend paying stocks to so-called growth sectors. Bulls see this as a positive sign of investor confidence, while bears worry that investors are becoming euphoric and/or complacent.
- Signs that the economy is improving and corporate profits are strong lead analysts to forecast increased capital spending. Many expect technology stocks to reap the benefit as cash-rich companies invest in the equipment they need to keep their sales and profits strong.
- For those who like to look at past market trends, the current bull market has logged almost five years – a long run by most people’s reckoning. Naysayers also are concerned that there’s been no market correction in two years – statistics show that corrections of 10 percent or so usually happen every 11-12 months. Of course, it’s usually futile to look at past history to forecast the market’s future. And while bulls acknowledge that this rally might be entering its final stages, they insist there’s still life in it.
Whatever your viewpoint, be aware that the above are general observations and are not a substitute for advice from your tax and investment professionals.