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Five Reasons Stocks Will Push Higher

Jul 14, 2016
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SMITH BRAIN TRUST — Stock prices are setting new records but could easily charge much higher, says economist Peter Morici, professor of international business at the University of Maryland’s Robert H. Smith School of Business. “The U.S. economy is growing again — about 2.5 percent in the second quarter and going forward — and corporate profits are rising again.” Post-Brexit, the dollar strengthened against foreign currencies, “but overall it remains well below levels recorded earlier this year and last,” Morici says. “That should aid in the translations of U.S. earnings on foreign operations into dollars on corporate profits statements.” Morici gives more factors in a recent guest piece at Investing.com. Here are five of them:

1. The naming of Theresa May as British Prime Minister “should firm the outlook for UK growth and stocks. Although much uncertainty about Brexit persists, and the British economy may flutter for a few quarters, its long-term prospects remain strong.”

2. Europe’s anemic growth “and the stress imposed by the immigration crisis, half-hearted market reforms, a single currency and fiscal austerity compel the European Central Bank to continue its negative interest rate policies.”

3. “In Japan, a shrinking labor force, resistance to immigration and halting deregulation, limit growth and compel accommodative monetary policies.”

4. “In China, slower growth, the absence of competent financial market regulation, reliable accounting and limits on foreign ownership make U.S. bonds and stocks the best alternative for private investors around the world.”

5. Intellectual property vs. hard assets: “Nowadays, economic growth is based much more on intellectual property—computer apps that create companies like Uber and artificial intelligence that power drones and robotics —and less on hard assets—industrial buildings and machinery. That greatly reduces the amount of financing businesses needs to create new and better products—the foundations of stock market wealth.”

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About the University of Maryland's Robert H. Smith School of Business 

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty masters, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.