Supporting the Stock Market

Investors should avoid exiting this bull market until all its supports have been exhausted.

The stock market is driven by “supports” or lack thereof. Although there is no official all-inclusive list, supports may include such things as valuation, market technicals, earnings dynamics, economic variables, player sentiment, and economic policies. How much support does the stock market have today? Or more importantly, how much support will it have in the coming year?

This note examines five key stock market supports which could become far more beneficial in the coming year. They include the Fed funds rate, the 10-year Treasury yield, the annual rate of CPI inflation, the annual growth in the M2 money supply, and finally, U.S. consumer confidence. What would it mean for potential stock market returns should several of these instrumental supports become, well, more supportive?