The following is a summary of our recent podcast, "Jeffrey Hirsch Says “Super Boom” Forecast Still in Play," which can be accessed on our site here or on iTunes here.
Stock Trader Almanac's Jeffrey Hirsch breaks the market down into five major components: psychological, fundamental, technical, monetary and seasonal. In our last interview with him in December 2017, he noted that market psychology was "frothy" and due for a reset, though the other four were still constructive.
“The technical picture has turned a bit mixed,” Hirsch said in our interview with him this month. “We’re bouncing around some and have opened up the volatility floodgates.”
Fundamentals remain firm, seasonals are bullish (at least until May) and monetary policy is still supportive, he added. Yes, he sees rates going up, but from historically low levels. At some point, this will take a toll on equities, but he doesn't think we are there yet.
“We only give a small amount of probability to a full-blown bear market (this year),” he said. “At this point, I think we can get some kind of correction during the worst 6 months (May through October).”
What to Expect in a Midterm Election Year
There is always some uncertainty in midterm years, Hirsch noted. Generally, we can expect to see a loss of some House and Senate seats for the party holding the presidency, and it’s generally more pronounced in the House just because there are a lot more seats up.
“Generally, in midterm years, there’s that weak spot in Q2 and Q3, what we call the bottom pickers paradise,” Hirsch said. “I had an average of a 50 percent move on the midterm low to the pre-election-year high.”
He does still expect some softness during the May-to-November time period. However, since December, despite the break we saw in markets, we were still up quite solidly from the correction, as were the first five days and the Santa Claus Rally, three indicators that Hirsch tracks. When they’re all positive, it’s quite bullish.
There have only been five previous midterm years that had the positive trifecta of a Santa Claus Rally, the first five days, and the whole month of January for the S&P, all of which has reinforced his bullish forecasts for the year.
End of Cyclical Bull, Beginning of Secular
From a big picture standpoint, Hirsch believes we’re nearing the end of a cyclical bull, but that we are just in the beginning stages of a longer-term secular market advance.
In 2011, Hirsch outlined his 15-year "super boom" forecast for the Dow to reach 38,820 by 2025.
“There will be a few bumps in the road,” Hirsch said. “But I think that anniversary in March 2009, the low we saw then and how far we've come is a testament to the fact that I think we've finally entered a new secular bull market.”
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