Chris Hondros
What's your outlook on equities? Jeffrey Hirsch, the editor-in-chief of the widely read Stock Trader's Almanac, believes the Dow Jones Industrial average will hit 38,820 by 2025. Key to his argument are historical patterns for war, peace, inflation and economic growth. "Super Boom" is the phrase he uses.
(You can read more about his forecast in this interview with the Globe's David Parkinson:
When do you get into the market -- and how should you play it? Following a transcript of our live online reader discussion with Mr. Hirsch on Wednesday, May 18, at 10:30 a.m. (ET). If you're viewing this on your smart phone, this link will work best.
Mr. Hirsch worked with Stock Trader's Almanac founder Yale Hirsch for 15 years, taking over in 2001. He studies and discusses market cycles, seasonality, trading patterns, predictions, and historical trends. He also edits the firm's digital toolkit, Almanac Investor, a subscription-based product including investor alerts, market data, and research tools.
Sonali Verma - Hello! We'll be starting our discussion shortly. I'm Sonali Verma, deputy investment editor at the Globe and Mail. Thanks for joining us.
10:28 [Comment From Jeff Hirsch]
Good Morning! This is Jeff Hirsch, editor in chief of the Stock Trader's Almanac and Author of Super Boom. Thanks for having me.
10:29 Sonali Verma - Thank you! Before we dive into reader questions, could you tell us a bit about how you developed your Dow forecast theory?
10:32 [Comment From Guest]
At the Hirsch Organization we track and analyze many historical patterns and cycles -- seasonal and otherwise. We are big proponents of the 4-year u.s. presidential election stock market cycle.
10:35 [Comment From Jeff Hirsch]
This super boom forecast for a 500% move in the stock market from the 2009 intraday low of Dow 6470 to 38820 in 2025 is based on decades of research on the impact of War & peace and inflation on the market. During war stock goes sideways for years. Once peacetime prevails and inflation levels off the 500% truly begins as it did after WWI, WWII and Vietnam
10:35 [Comment From Darcy]
What is your short term outlook for the us stock market, say over the next two years?
10:39 [Comment From Jeff Hirsch]
I am cautious not just over the next two years, but for the next 5 or 6. As i discuss in the book though i believe the low for the secular bear we have been in since 2000 was reached in March 2009, I expect it the market to remain range bound between Dow 14000 and 7000. My outlook for the summer is correction and possible mild bear. then another more significant bear market bottom in 2013 or 2014. I posted a chart of this on the blog.
10:39 [Comment From Nate]
How can you make this prediction with all the uncertainty out there on the markets? Europe/America are in serious trouble!
10:42 [Comment From Jeff Hirsch]
It resembles the uncertainty of the late 1970s after the 1974 bottom, the 1940s during and after WWII and the early 20th century up to and including WWI and the post war period. And all those secular bear, difficult economic and geoplitical times created a launching pad for the subsequent booms of the 1920s, the 50s and 60s and the 80s and 90s.
10:42 [Comment From Rita Silvan]
The market appears pricey; is anything a screaming buy right now?
10:46 [Comment From Jeff Hirsch]
Follow up for Nate: I expect trouble for the market and global economy over the next 5-6 years, perhaps longer before the boom takes off like the 1974-1982 period. FOR RIta: The market is pricey. I don't see any screaming buys. I have picked up some bear positions and bond ETFs as downside protection for the Worst Six Months. We issued our Seasonal Best Six Months MACD sell Signal on April 13. Will be waiting for a pull back over the next several months before making new long equity recommendations. Unless some great small or micorcap opp comes along.
10:46 [Comment From Erik]
Your financial markets forecast calls for bear markets. How do you see real global growth? I trust you are not of the view that emerging economies can plow forward at a brisk pace while the US essentially stagnates?
10:50 [Comment From Jeff Hirsch]
Small emeging economies as well as China, India, Brazil and other larger econs have helped sure up the global economy, but with out the US and Europe growing more robustly we are bound to slog along. Global econ growth is still tepid over all. The next boom may not be lead by the US, but it will surely be a big player. UK ruled the 19th century, US the 20th. China and India may rule the 21st, but not with out US growth.
10:50 [Comment From Guest]
How to you feel about the stability and prospect of Cdn markets?
10:54 [Comment From Jeff Hirsch]
I have always traded on the Cdn markets. But that has mostly been mining shares. Cdn natural resources have help bring the loonie into parity with the dollar during the commodity boom since 2000. over the next several year this commodity boom is likely to subside as the global economy improves equity boom takes off. Cdn should remain stable as Cdn econ has expanded to not soley commodiity, but will like settle down as resource prices level off
[Comment From Rita Silvan]
Hi Jeff, What about canadian stocks for the boom?
10:59 [Comment From Jeff Hirsch]
I don't have any specific Cdn stocks to recommend. But as i recommend in the book, any chronic dividend payers -- companies that continue to increase dividends consistently for 10 yrs or more -- are a great place for the coming sideways years and for the boom. As well as those in the areas of the future in alternative energy, energy tech, traditional energy, biotech and genomics, agriculture and water.
11:00 Sonali Verma - One of our readers left this question in the Comments section of this article:
Brent Wilkins: I'd be more interested in the price of GOLD if the DOW hit 38,000. We would need to be at QE 666 for it to be that high.
11:00 Sonali Verma - What is your outlook for gold?
11:04 [Comment From Jeff Hirsch]
Gold has a bit more upside, but as when stocks take of like they have in the past it means global econ is solid and gold tops out and pulls back. At the last secular stock market peak from 1999-2001 gold was in the 250-300 range. From 1980 to 1999 (the last super boom) gold was in steady decline. I suspect a similar trend when the next stock boom commences in about 2017-2018 as per my forecast.
11:04 Sonali Verma - Our readers are also wondering about what that might mean for the U.S. dollar and the Canadian dollar.
11:07 [Comment From Jeff Hirsch]
Unfortunately for my northern neighbors this will likely weaken the Cdn dollar and should strengthen the US dollar across the board. But Helicopter Ben's press will like keep the dollar historically low as is inflation builds. this is a major factor of the boom cycle.
11:07 [Comment From spot]
were is oil going
11:11 [Comment From Jeff Hirsch]
I do not have a specific price target. But Short term oil looks to be in a corrective phase though long term it will probably continue to move higher until we begin to truly get other energy options to hydrocarbons. I hold a few energy ETFs. FCG, XLE, XES. Seasonally the oil & gas stock bullish period winds down in june/july as the ramp up for AC and gas dissipates. I may add to those on pullback.
11:11 [Comment From Guest]
Jeff: Will the price of oil be the most important factor in constraining global economic growth? Or do you see other more significant factors intervening to slow growth?
11:15 [Comment From Jeff Hirsch]
Oil is an important factor. But the most important factor for me is overall geopolitcal stabilty. Markets have gone nowhere over the years when the world is at war. This is clearly depicted in my chart of the 500% moves. long sideways periods surrounding major wars are shaded. Should things not wind down in Afghanistan or heat up in the Arab Spring and mideast or elsewhere that cause the US, NATO, et al to commit to major extended combat operations that will be the most significant drag on growth.
11:16 [Comment From Gino]
Hi Jeff - what's the best way to take advantage of your Dow prediction with long-term investments?
11:19 [Comment From Jeff Hirsch]
The dividend stocks we recommend in last chapter or their ilk are a great place to start as well as the ETf sectors we list and i mentioned above. But bottomline here is my prevailing mantra to be prepared for the next boom. Be patient, you will have some great buying opportunities of the next several years. When the Dow is below 10K or a bear market is officially declared in the media -- that is the time to load up on stocks.
11:20 [Comment From Neil]
What sector do you see having the best buying opportunity over the next 10 yrs based on your forecast?
11:22 [Comment From Jeff Hirsch]
Aternative Enery/energy Tech or Biotech/Genomics. These are there areas where i think the next cultural pardigm shifting enabling technoligies can come from. Like the auto of the 1920s. TV, appliances and suburbia of 1950s and 60s. and the info revolution of the 1980s and 1990s built on the microprocessor, PC, Internet and cell phone.
11:22 [Comment From Robin]
What would you recommend that investors hold right now for the next 5-6 years? Cash, bonds and T-bills?
11:24 [Comment From Jeff Hirsch]
Stocks. Over the long haul Stocks have been the best investment and hedge against inflation. A secular low in bonds appears to have been set in late 2008. Cash always loses value to inflation. though i loved holding it in 2008. If you need income, top dividend stocks are a better bet.
11:24 [Comment From GGG]
There is repeated reference to a Dow below 10'000 and that this could be imminent, which is a drop of around 20% from current values. Related to fairly recent events (such as the 2008/2009 drop) surely this his is a major concern ?
11:30 [Comment From Jeff Hirsch]
I do expect the Dow to drop below 10,000 at least on more time before leaving it behind for good. One technical pattern I have discussed with subscribers 3 peaks and a domed house pattern suggest we could hit 10K later this year -- only a 22% drop.
11:30 [Comment From Rita Silvan]
The Economist is calling a tech bubble. What's your take on tech? I know you've got IBM on your 10 for the boom list.
11:33 [Comment From Jeff Hirsch]
Computer tech fueled the last boom. And IBM has been involved in the past 3 booms and should participate in the next. But the major growth is likely to come from a new tech. It could be alt energy or bio, but also something non of us are yet aware of in dev now somewhere. keep on the look out
11:33 [Comment From Dale]
How does "peak oil", if vaid, affect your prediction?
11:35 [Comment From Jeff Hirsch]
It supports it. If we do run out, we've got to come up with another way to power and fuel our exponentially growing energy demands. I am betting on human ingenuity and the return of our "animal spirits" to come up with the next spark for the the next boom. We have done it for eons!
11:35 Sonali Verma - Jeff, sincere thanks for giving us so much of your time and sharing your expertise with us. Is there anything you'd like to say before we wrap it up?
11:37 [Comment From Rita Silvan]
thanks Jeff. Enjoyed the book and your comments! Rita
11:37 [Comment From Jeff Hirsch]
Thank you. It has been a pleasure. I would just caution everyone over the next few months of a more significant pullback and to be patient and pounce on the buying opportunity and others over the next few years. Cheers!
11:37 Sonali Verma - Thank you. And many thanks to everyone who joined us today with their questions and comments.