Stock Chart {11.07.19}

You can double-click on the chart to make it larger.  Some of the reasons stocks might be breaking out right now could include:

-Better fundamentals.  3rd quarter earnings were better than expected.  Investment community beginning to look at earnings in 2020-early 2021 and so far they expect those earnings to accelerate.

-Federal Reserve.  The Fed has signaled they won't be raising interest rates at any time in the near future.  You simply don't fight the Federal Reserve.  Easy money has traditionally been good for stock prices.  It could help overseas markets as well.

-Easing of international tensions.  The trade deal with China isn't done and the hard bargaining in stages 2 & 3 has been kicked down the road.  Both sides right now need a period of detente.  China needs to focus on internal matters and the President needs to focus on getting reelected.  

-Favorable seasonal factors.  We are well into the best six months for stock performance, while November and December have traditionally been good months for stocks.  This is a tailwind for markets right now.  The only print that matters for Wall Street is the one that will be posted at the end of trading on December 31st.  That date is now in focus by institutional investors that are badly behind the curve in terms of their portfolios and respective benchmarks.  This means a very strong probability that any dips in the markets between now and year end will likely be bought unless something drastically changes.  Also after two years of markets basically going nowhere investors have substantial cash reserves.  That's dry powder that could potentially support a move higher in the coming months.

Now there are all sorts of things that could still happen to change this analysis.  The impeachment process running through Congress right now is a wild card and there's always a chance that something comes up with a US-China trade deal.  Best advice there is to assume it's not done till there's a signature on a document.  That being said a whole lot of probabilities suggest stocks have a greater potential of moving higher in the next few months, if for no other reason then it's the end of the year.

I said a few weeks ago that I thought  the potential is there for stock advancement in the 6-8% range next year. Throw in a nearly 2% dividend yield for the S&P 500, and you see a total return potential that could be around 10% next year if certain things pan out.  I'll stick with what I said then and throw in a 2020 updated cone of probability  potential upside in 2020 of 3250-3300 on the S&P 500.  No guarantee we get there, just telling you what is possible if certain things happen next year.  I also think there's a higher probability that most of those gains will come in the first six months of 2020.  I think after that investors will focus on the elections and stocks potentially could be range bound until after those results are known next November.  

But that's a long way off and Wall Street will just want to get through 2019.  We'll review 2020 at the end of the year when we know how everything shook out in November and December.

Note that I will need to be out dealing with a family issue the 1st part of next week and likely won't be posting here until probably Thursday or Friday.

Chart is from Tradingview.com although the annotations are mine.

*Long ETF’s related to the S&P 500 in both client and personal accounts.  I reserve the right to change these investments without verbal, written or electronic communication at any time.