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The Case for an Extended Bull Market

We have often written about the "asset inflation" bubble caused by a trifecta of near zero interest rates, record levels of money printing not seen in american history and the federal reserve acting as a backstop for everything! Well maybe not everything, but again more than ever before. The "relative value" of the dollar continues to fall against this backdrop. a trend that has continued over a 50+ year period. The purchasing power of the dollar has fallen by 92% over the last 50 years. Let that sink in for a moment. The only saving grace is that other westernized countries are not faring much better yet none have the size of national debt of the USA. It helps to be the worlds reserve currency!

In the midst of a historic "asset bubble" of "everything" where many fund managers are cautious, there are well respected fund managers talking about a continuation of the bull market into 2038, one that is fueled by the "millennial" generation. The arguments are compelling and we wanted to share some of them in this article.

Cathie Wood, the architect of Ark’s comprehensive range of ETF's sais: “So this is the echo of the baby boom,” in reference to the millennial investors being the new drivers of an extended bull market into 2038 to mirror the baby boomers who fueled a 20-year bull market in stocks during the 1980's and 1990's.

She goes on to say: "I do believe that real growth is going to look scarce but that there is going to be spectacular growth based on innovation," referring to the fact that the digital framework is an entirely new paradigm vs. the historic industrial paradigm. There is a lot of truth to this perspective. Think for a moment about the burgeoning developments in AI (artifical intelligence), super and quantum computing, gene sequencing, blockchain technology, decentralized finance, NFT's, materials sciences, electric vehicles, electric "everything", battery and renewable technologies and so many more paradigm changing innovations and you have a unprecedented confluence of factors that can help each synergistically fuel an exponential level of innovation, discovery and rate of growth that has no precedent.

Tom Lee of Fundstrat is the main proponent of an extension of the bull market driven by the millenial generation: He sais: ""Demographics are destiny," and "Millennials are going to be a major incremental and additive driver to US economic growth, and better growth equals better equity returns". As a side note, it is also worth noting that millenials are ammong the leading groups of investors in digital currencies and tokens. Given the rapid rate of adoption, disruption and innovation expected in blockchain over the next 5-10 years, it is likely that millennials will continue to be significant investors and participants in this trend as well.

Tom Lee sais that "every single peak in the stock market has coincided with the peak of every single generation", This in combination with the Fed keeping interest rates low, institutional cash of almost 3.2 trillion sitting on the side lines and a global economy emerging from recession are key factors why Lee sais "we are structurally bullish".

It is important to add that markets are inherently cyclical and irrational exhuberance can take them to premature heights that inevitably correct. What is also important to note is that over the long term, markets have consistently risen. The current backdrop of rapid innovation and a favorable economic macro climate should fuel investment and growth over the short and long term with some inevitable speed bumps and economic concerns along the way. If this plays out along the lines that Tom Lee and Cathie Wood think, this will turn out to be one of the greatest bull runs in history. Time will tell!

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Walnut Creek, CA 94596
Phone: 925-906-9800
Fax: 925-906-9884
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