Will the stock market boom go bust or at least slow — and if so, when and why?
Not for at least another 12 months — and perhaps not until sometime after 2019 — and then most likely only due to "natural" causes, said speakers at the opening Tuesday night keynote at the Charles Schwab IMPACT 2017 conference in Chicago.
"Stocks have been rooted in better fundamentals of growth around the world," Jeffrey Kleintop, chief global strategist and senior vice president at Schwab, told many of those of the 4,000 registered investment advisors in town for IMPACT, who had gathered in a cavernous hall at the McCormick Place conference center for the presentation.
"That's been true through the Brexit vote, through the U.S. election, through the shift in central bank policies — even the North Korea risks. Stocks have remained anchored in better growth prospects," he added, with every one of the top 45 largest world economies — including the U.S. — recording positive growth in 2017, according to the OECD.
More of the same is said to be on tap for 2018. "That is a fantastic environment for investors," Kleintop said.
The current pace of growth, the best and broadest in 10 years, "is lifting earnings, with little sign [and] little risk of recession or a bear market or bubble-bursting in the next 12 months," Kleintop said, also noting that the yield curve — the difference between short- and long-term interest rates and, historically, a good predictor of a coming recession — seems to indicate the all-clear for at least another two to three years.
Liz Ann Sonders, chief investment strategist and senior vice president at Schwab, agreed. The yield curve, she said, indicates "very minimal lift at this stage in the risk of recession, and I think we really probably don't have to really worry about that until about 2019 or so."
Good news for sure, but optimism can eventually morph into investor euphoria. And Sonders reminded attendees that the American-born British investor and fund manager Sir John Templeton once famously quipped that, in the end, bull markets die on euphoria.
"We all know this has been a unique bull market, so I have my own take on this: That this bull market was born on despair, grew on disbelief, has matured on skepticism and may die on acceptance," Sonders said, referring to the somewhat tempered (historically speaking) optimism typical of today's investor.