Tuesday, December 11, 2012

Too Much Pessimism?

Sunny Days Ahead?

Pessimism is pervasive. Many people believe the economic future is bleak.

Perversely, investment strategist Richard Bernstein believes that attitude augurs well for future stock market performance.

Historically, Bull markets --- great increases in stock prices -- have often begun in difficult times when people are most discouraged and predate economic recoveries. Bernstein, formerly the top strategist for Merrill Lynch, believes that the current widespread fears and disgust are sowing the seeds for the greatest bull market of his lifetime.

Speaking at an investment conference in Boston recently, Bernstein said he sees signs of improvement in the economy. For one, he said, total debt -- including government, mortgage, consumer and business debt -- has dropped at the fastest pace in modern U.S. history.

Housing is beginning to recover as is the job market. Stock market valuations, particularly compared to other asset classes such as bonds and commodities, are reasonable.

If Bernstein is correct, the stock market could potentially soar sometime in the next few years and the economy will follow. Prosperity may not be just around the corner but don't discount the possibility that good times lie ahead.