5 triggers that will ignite the next bull market

the central bank would assess the toll that stock market weakness, debt-ceiling negotiations and the European debt crisis has taken on the U.S. economy.

Is the market’s recent rally sustainable? That depends on whether the upward move is simply profit-taking, or if it’s an early sign that investors are gaining enough confidence that recession can be avoided and corporate earnings will grow to shift money out of gold, Treasury bonds and other safe havens and take more risk with stocks.


the stock market is a forward-looking mechanism, and part of the reason for stocks’ swoon this summer was due to investors repricing equities to better reflect corporate earnings growth expectations. That reassessment may not be finished. September has been the worst-performing month of the year for the Dow and the S&P 500 since 1950,
do investment professionals — financial advisers and mutual fund managers with a mandate to shift among stocks, bonds and cash — need to see in the economic and political climate in order to put more money into stocks? Here are five potential catalysts:


1. The U.S. deals with its debt crisis

A meaningful compromise would take into account the cutback in entitlements and the restructuring of taxes that would resolve the current financial budgetary difficulties in a believable way, Altfest said, though he added that such a deal appears unlikely until after the 2012 presidential election.

2. Europe sees resolution of its own debt woes

Concerns over the eurozone’s ongoing debt crisis are also weighing on U.S. stocks. A resolution of Europe’s financial instability would be a green light for stock investors.


you’re really looking at a major banking crisis in Europe
3. Retail sales strength improves


Firm retail sales in August would encourage the market at least on a short-term basis, Altfest noted.

Retail sales climbed 0.5 percent in July, the most in four months. The August number will be released by the Department of Commerce on Sept. 14.

 retail sales excluding gasoline provides a much more realistic view of the health of consumers’ discretionary spending.


4. Gold, Swiss franc weaken

A decline in the value of gold and the Swiss franc would be another upbeat sign for the stock market.

As a measure of fear, gold has been soaring in price, driven up by investor concerns over the U.S. and Europe’s economies, as well as a conviction that gold is an alternative currency to the U.S. dollar, the euro and other paper money.

If the gold prices start to move south, that would suggest greater comfort with the economic environment and a willingness to take higher risk, which would be positive for stocks, Altfest said.


5. Bank stocks strengthen

The financial services sector is the U.S. market’s worst performer so far this year,

“People are very nervous about the banks, and for the banks to do well would suggest that people are lessening their concerns about the economy,” Altfest said.


It will likely take a long time for the banking sector in both the U.S. and Europe to unwind its problems.

5 triggers that will ignite the next bull market - Weekend Investor - MarketWatch