Armstrong: US Stocks May Double Over the Next Year and a Half

Many investors think US stocks are already in a bubble and likely to crash, but, according to Martin Armstrong, aka "The Forecaster", they are likely in for a big surprise over the next year or two.

Referring to the Dow Jones Industrial Average, Armstrong told FS Insiders this Thursday:

"18,500 has capped the US stock market for right now, so we're not breaking out. We'll get through that. The next level is 23,000. If we get through that area...then you're looking at the final phase transition that will probably take us into 2017 where, yes, the stock market can double."

With most of the major market indices in the US already at record levels, what could possibly cause them to double over the next year and a half? If you're thinking soaring economic growth, think again.

Armstrong sees international capital flows fleeing a bubble in global bond markets, particularly in Europe, where yields have been driven down to, in some cases, levels never seen before in recorded history.

With bond yields pushed down to all-time lows, bond prices are now at all-time highs. As rates eventually start to move up, large investors will try to prevent losses by shifting into other areas with US assets, particularly stocks and real estate, serving as the most likely destination, said Armstrong.

"Sometimes the private sector gets out of line, so you sell stocks and run into bonds. What happens when government [bonds] are in trouble? You go the opposite way," the international forecaster and creator of the widely-cited Economic Confidence Model (see image below) told the audience.

Armstrong has spent most of his life studying global capital flows and their defining role in booms and busts throughout history. His forecasts and calls have been noted in various major publications and he is also a highly sought-after speaker at his World Economic Conferences around the globe. His next upcoming conference in the US will be held November 7-8th in Princeton, New Jersey and is titled, "The Big Bang"—an appropriate title since he also thinks the world is headed for a major crisis.

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