Others

Gonna Fly Now

By, 12/21/2006

Yo, Adrian! 2007 has all the makings of another sequel. A fifth remake, in fact. For four years the stock markets were the ultimate underdog story: facing a barrage of negative sentiment, worries, fears, doomsdayers, naysayers, hecklers, and non-believers. (See our past commentary "Skyscraper of Worry".)

But whether it was a trade deficit or Apollo Creed…the champs just had too much heart and too many positive fundamentals to keep the story from a happy ending.

So today Rocky Balboa's in the ring one last time. He might be 60, but the story hasn't changed. And yes, this bull market has been around awhile, but like the Italian Stallion's ring exploits, the script stays the same, and we believe the champ's got another great title fight left in him. Even after all the prior victories, the fundamentals have left markets in terrific shape, hungry for a victory, and still with something to prove—stock valuations relative to alternatives are still cheap, and all major risk factors are either misconstrued or already priced-in.

MSCI World Index Heavyweight Title Wins (The Current Bull Market):

2003: +33%
2004: +15%
2005: +10%
2006: +21% (year-to-date)
2007: ???

The Contenders (Positive Fundamentals):

• Strong global economic growth
• Strong corporate earnings
• Benign long rates
• Attractive relative valuations
• Favorable supply trends

The Glass Jaws (Misconstrued or Priced-in Risks):
• Dour Sentiment
• The falling US dollar
• The new US Congress
• Monetary policy
• Geopolitical Concerns
• Energy Prices
• Housing market
• Inflation
• Stock option backdating
• U.S. budget deficit
• U.S. trade deficit

(Note: We've written extensively on each of these topics. See our past commentaries.)

It's a new year and a new fight, but the story is largely the same. 2007 will be another positive year for global equities. Get those portfolios into fighting shape for the continued rally ahead.

Anyone up for a jog through the streets of Philly?

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Source: Bloomberg. MSCI World Index total return data.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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