We’re not done with the bull run yet, says BMO’s Brian Belski, who claims that even as the markets approach ten years out from the 2008 financial crisis, there’s likely still a good decade of growth ahead.
These are heady times for investors. The major indexes keep charting higher and stock prices continue to climb, having more than tripled in value over the past ten years. In 2017, the Dow Jones industrial average grew by a whopping 25 per cent, while the S&P jumped by 19 per cent (by comparison, Canada’s S&P/TSX Composite Index grew by a more modest 6.49 per cent). Now into the first weeks of 2018, there seems to be no stopping the market’s upward trend, with both the Dow and S&P hitting new highs.
All signs that it’s time to get busy worrying, right?
Unsurprisingly, strategists are coming out of the woodwork, saying we’re in the late innings of a bull run and arguing that a major downturn is around the corner. Want evidence? It’s already been the second-longest bull market on record and valuations are at dizzying heights. Interest rates are on the rise, wage inflation is expected, political uncertainty abound.
Surely, these are hallmarks of dark days ahead, right?
Quite the opposite, says Brian Belski, chief investment strategist at BMO Capital Markets, who predicts that 2018 will keep the party going, with the likely caveat of a minor correction along the way. In fact, Belski says that this bull run literally has ten more years to go.
“We’re fundamental analysts at the end of the day,” says Belski to BNN. “We had a generational opportunity in 2009 to buy stocks and we became bullish and said there’s a 20-year bull market ahead of us — and people thought we had three heads. Now, fundamentals are even stronger than they were in 2009.”
“People are still doubting this, but we’re nowhere near any kind of euphoric top of the market,” says Belski. “That doesn’t mean we’re not going to see a pullback, and that’s an opportunity if you’re an investor. When we see froth in the overall stock market, that’s when we’ll see pullback.”
As to where investors should be looking for any signs of bargains in a market full of high prices, Belski says that the banks are where it’s at. “We still think that financials are an under-owned space,” says Belski. “Most analysts who cover financials are modelling out very conservative numbers [for revenue and earnings estimates] on the banks, especially in the United States. We think there’s a huge opportunity on the financial side.”
Belski argues that as bond rates start looking less attractive, financial institutions are going to profit from investors wanting to turn to other opportunities like ETFs and mutual funds.
“We think there’s another ten years to go but that doesn’t mean that the skies are going to be blue every day, it still means you need to be disciplined,” Belski says “You need to buy good companies and you need to focus on fundamentals. Don’t follow the herd, follow your discipline and your process.”