Winter Letter to Clients {Part III}

Here is part III of our most recent letter to clients.

What Then Is The Longer-Term Outlook For The Economy?  Stocks?

{If you read nothing else from these week's posts please read today's and tomorrow's entries.}

The stock market has made a parabolic move higher in 2018 and so my remarks from here on need to be recognized in that context. First, I am fairly positive for the next several years regarding the economy assuming we don’t have an unexpected event wash over the transom.  As such, I believe we may be about 40-50% through a longer-term secular bull market that potentially could last at least another five years.  The reason I’m so positive has to do with the pace of technological advancement, which is increasing exponentially.  Pay attention to almost everything that touches our lives and you’ll realize this is true.  Look at the advancements of self-driving cars or the continued refinements of safety equipment garnered from technology into autos.  Medicine is seeing advancements at a rate perhaps not chronicled since the beginning of the 20^th century.  Space exploration is entering what I believe may well be it’s 2^nd golden age, rivaling even the days when Americans landed on the moon.  Computer science and the technology it is spawning are taking us into everyday realities that were once the province of science fiction. Engineering concepts from hyper-drives to desalinization to porous concrete have the potential to redesign modern cities and the way we live.  Renewable sources of energy are becoming significant sources of power.  The coming ability for example to put photovoltaic cells onto roof shingles is likely to make solar powered energy more economic efficient even in areas that don’t see the same amount of sunshine as places like California, Florida or Arizona.  Behind all of this is the exponential and geometric increase in knowledge that is unlikely to be curbed.  Today, knowledge can be transferred around the globe with the click of a mouse.  An idea formulated in London can be reviewed instantaneously in Chicago.  You can make a phone call to Australia as easily as you call your neighbor down the street.  Short of some almost unimaginable cataclysm this is unlikely for good or ill to ever go away.  Behind these ideas are business ideas, jobs and economic advancement.  This is why I believe we aren’t likely to enter into a bear market any time soon.  This plus the lack of speculative excess leads me to think this bull market could continue for years.  However, please understand that being in a secular bull market probably doesn’t mean the stock market will always be a one-way ticket higher.