Over coffee this morning I was wondering if ‘boom’ is an accurate word to describe the robust compilation of economic data which collectively reflect the surge in assets markets that has taken place since last December — when the FOMC commenced its stalled rate-hiking program.

Financial conditions worldwide certainly do indicate a broadening acceleration of growth activity. It is hardly surprising that the powerful innovation cycle that started just before the financial crisis has now grown into a full-fledged boom. Some catching up would have been expected.

Of course, a major problem with booms is they can sometimes lead to busts. But the bust of 2008 had very little relationship to things going on in the world of technology or innovation – instead, it was nearly all about inflated house prices and dodgy mortgage schemes. Besides, booms are not necessarily bubbles. Bubbles always pop but booms often usher in new paradigms. So comparisons of now to 2008 are probably not as useful as comparisons to the last ‘tech boom’ – which did lead to the ‘dot-com’ bust. There are, however, great differences this time.

Today’s technology sector is widely diversified, both from a country aspect and, significantly, the large number of firms participating.

As you may recall, some of the big names that made up the late 90s boom were creating entirely new enterprises and were thus unavoidably taunting danger. Several of them were in a position that could be described as being in the middle of the ocean while trying to build a boat. Today’s participants are significantly more mature than their 90s counterparts and that can make a big difference. By far the most important difference between then and now is that the drivers of today’s boom are, for the most part, profitable companies.

And the technology centers are most certainly not all in the USA- China, India, Hong Kong, and many other areas are part of the current growth trend. This kind of diversification lends a degree of stability to both economies and the markets.

The result has been an incredible burst in the value of global equity markets. Bloomberg’s calculation of World Exchange Market Capitalization is showing a record $25.3 Trillion increase in market cap in just the past 12 months. (That increase alone is more than the entire S&P500* Market Cap!) The World Market Cap now sits at $90.66 Trillion. That increase is 38.6% (according to Bloomberg).

Not only is that pretty fantastic (and nearly unbelievable) but in our opinion, it shows little sign of exhaustion, even though there is starting to be some exuberance entering the markets. We see the world, like the current S&P earnings numbers, to be growing steadily, and while we wouldn’t step out and predict that next year could show the kinds of steady gains we’ve seen globally this year, we frankly expect the current expansion to continue on into next year.

Not all growth spurts are equal but a spurt by definition reveals its ephemeral nature. Some have stronger and weaker growth and/or periods of more and less volatility, so enjoy the boom while it lasts. When (and if) it ends it will go softly into the night and it will avoid all the drama of a bursting bubble.

Market Minute 11/10/2017 – Not Much Happening Today, So…

There’s very little economic or earnings news this morning, so I think we’ll add a comment to our current outlook.

Yesterday we had a minor drop in the indexes. Even a minor drop enables the doom and gloom ‘experts’ to reappear on CNBC to tell us all to sell stocks now as the ‘big one’ is right around the corner. We’ll agree to the extent that huge rises like the one this year since mid-August is quite unsustainable — but then the media feels compelled to pontificate.

Remember that bear markets do not just suddenly begin out of nowhere. At least that’s been the case in the past. They take time and they have significant rotation and shifts in sectors. They will require fear and thus produce high volatility. None of that is in THIS market.

And… yesterday was another example of buyers jumping in at every opportunity. Earlier in the day markets pulled back but then buyers jumped in and pushed markets back up. Today looks like it could be more of the same. News of possible delay in tax reform may have been the culprit that gave us a weak opening. But so far (as of mid-morning) more buyers are buying the dip and markets are responding as one would expect… by heading up. Just another day – and likely another positive day for markets. Ignore those nay-sayers and enjoy this market.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051

Phone (602) 252-8700
Fax (602) 252-8701
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