While most of the market remains hyper-focused on anything bearish, there have been three major events brewing on the sideline that could cause a dramatic and fast 20% rise in the markets.
Investors have had few places to hide in the first five weeks of the year, and all the major averages are down significantly in 2016. Other sectors such as small caps, biotechs, and transports are faring much worse and are in official bear market territory. Distress among energy producers is increasing as oil stubbornly stays around the $30.00 a barrel level. Correspondingly, defaults in the high-yield credit market are projected to be at their highest levels during this year than at any time since the financial crisis.
However, all is not gloomy on the market. The U.S. has not yet entered a recession and probably will not at this time. Job growth remains solid and outside of manufacturing most of the rest of the domestic economy is holding up well. Much has been written on how China needs to stabilize and the Federal Reserve needs to move to a more dovish stance before the markets can rally. However, they are not the only things that could boost sentiment on equities. Here are three things most investors don’t have on their radar but could provide support for stocks in the months ahead.
Rubio’s Surge Continues:
There were a couple of interesting things that came out of the Iowa caucuses. On the Democratic side of things, Hillary Clinton won six out of six coin flips to win six tied caucus sites and eked out a slight victory over Bernie Sanders. Packers’ fans would probably pay good money after their recent playoff defeat to have any of those coins.
On the Republican side, Donald Trump proved he was not invincible after all. Ted Cruz managed to win the opening salvo in the nomination season even while touching the third rail of Iowa politics – support for the ethanol mandate. More interestingly, Marco Rubio surged way above expectations in a state he was not projected to do well in; he just missed taking second place from Mr. Trump by one percent. He emerged from the state with the same amount of delegates as the former reality TV star.
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