Nick’s Note: Most of our readers know Palm Beach Research Group’s very own Teeka Tiwari as a world-renowned cryptocurrency expert. But Teeka is also a former hedge fund manager and Wall Street executive with decades of experience in the stock market.
Yesterday, Teeka told us his predictions for the cryptocurrency market in 2018. Today, he turns to the stock market.
Nick: T, yesterday you predicted the crypto market is going much higher in 2018. What’s your prediction for the stock market?
Teeka: The GOP tax bill that passed last month will be bullish for equities. Sure, some of this is already priced into the market—that’s a big reason for last year’s rally—but there will be more profits to come.
Because of the tax overhaul, companies are going to keep more of the money they make. And they’ll use that money to either start new, profitable projects or reward shareholders. We’ll see lots of companies pay out dividends and buy back shares. Both will be good for stock prices.
The other thing that will continue to help equities is low interest rates.
Where else are you going to get any kind of return? Bonds are the main alternative to stocks… and their yields are still near all-time lows.
So, you have to be invested in stocks right now.
Nick: Do you see any warning signs out there?
Teeka: One thing that worries me is a potential rate hike by the Fed. It won’t happen immediately… but this would be a headwind for stocks.
Right now, the 10–year U.S. Treasury yield is a measly 2.4%.
If the 10-year yield gets up to 3–4%, it might suck money out of the equity market.
This is a real concern… I looked at the long-term charts, and it looks like yields have bottomed out and want to go higher.
I think we could see 4% yields in 10-year Treasurys in the next couple of years. And this could slow down the equity market a little bit.
Nick: Should investors be worried?
Teeka: Absolutely not. Right now, the market is trending up and we’re not going to fight that. Also, generally speaking, bond yields don’t start to seriously ding stock market returns until bonds start yielding about 6%… and that’s a long way away.
As you’ve told your Daily readers, ride that trend and rely on your stops and position sizing to protect you.
This bull market could go a lot higher before it turns down. Selling stocks now would be a bad idea.
That’s why we’re not doing that in any of our Palm Beach Letter and Palm Beach Confidential portfolios.
Again, we’re going to rely on proper position sizing and our stop losses to keep us in the market.
As long as you aren’t overextended in any position and have a proper exit strategy, you’ll be fine. And you can continue making money in the market.
We’re going to keep looking for great investments and value in the market. There is plenty if you dig deep enough.
Right now, in our Palm Beach Letter portfolio, we have eight high-yielding investments. The average yield is 7.3% for these investments.
We’re getting better and safer yields in stocks than we’d get with bonds right now.
Even at all-time highs in the market, you can still find great yields… and great values. It’s just harder. But wherever there’s great value, we’ll find it.
Nick: I plan to hang onto my stocks until the trend ends, too. Thanks T. Looking forward to your picks in 2018.
Taxpayers in California have no idea what’s coming… After years of mismanagement, Californians will now be forced to spend billions of dollars to fix a completely preventable problem.
The good news?
This spending has already ignited a bull market in some little-known corners of the market. But enough is enough, and the bill is about to come due. This story is just beginning…