That’s the subject line of an email Deutsche Bank economist Torsten Slok just blasted. Slok is convinced stocks will go up until there is a recession.
“I believe the stock market will continue to go up until we get a recession. And we are nowhere near entering a recession. Recessions happen because of a bubble bursting in capex (as we saw on 2000) or because of a bubble bursting in consumption (as in 2008) or when monetary policy is too tight, i.e. when the fed funds rate is well above its neutral level. None of this is happening at the moment. If anything, we are seeing too little capex and consumption.”
Slok says he expects “some wobbles” as the Fed begins to raise rates, but this will not derail the current economic expansion.
“I don’t think the low dealer inventory issue will be big enough to cause a recession because balance sheets in the banking sector, household sector, and corporate sector are today much stronger than they have been in a very long time,” Slok writes. “Or put differently, Fed hiking rates in 2015 will not derail the current expansion. That’s why I expect equities to continue to rise steadily over the coming years.”
So there you have it.
This, however, is just Slok’s view. The Deutsche Bank “house view,” per the firm’s equity strategy team led by David Bianco sees the S&P 500 finishing 2014 at 1,850.
On Monday, for the first time ever, the S&P 500 touched 2,000.
Here’s the rubric for financial stability from Deutsche Bank, which right now is showing “no signs of significant systemic risk in the financial system.”