January 10, 1997
The Best Investment Opportunities in 1997 are the Dow (after Making a Correction), Commodities, and the British Pound
Our newspaper urgently did an interview with Mr. Armstrong, who is the most famous analyst all over the world about markets in 1997. This is part two of the interview.
In the urgent interview with Mr. Armstrong, the second article deals with the Dow, which is producing a new peak point, and the best investment in 1997. In this interview he suggested the Dow would make a correction in the near future for the first time since he was carried on this newspaper. And he took up the commodities such as crude oil, agricultural commodities and gold, the Dow after making a correction and the British pound as the best investment in 1997.
The Outlook for the US Share Market
The US share market is now vulnerable to several factors, one of which is profit-taking due to capital gains taxes in the United States. The economy remains quite strong and we do not see any real recessionary pressures until 1998. Therefore, the chairman of FRB; Mr. Greenspan’s comments are appropriate insofar as a cautionary note that interest rates may rise further rather than decline. This could set the stage for a correction.
The US share market has rallied up to our target above the 6,000 mark on the Dow basis. This means that the Dow has reached a target area where its value is now at par with most other assets such as real estate. Virtually everything has increased 600% or more since 1980, including the national debt rising from $1 trillion to nearly $6 trillion. The peak price for the Dow in 1980 was $1,000, therefore rising up to this area was normal. This means that while the Dow should make a correction in 1997, it is not a bubble top. That appears to be due perhaps as early as 1998 but more likely not until 2000 or 2003 with a price objective closer to the 10,000 area
But this market is long overdue for a correction and that is what appears to be likely at this time. If the S&P 500 Futures closes below 725.00 on a weekly basis, then the correction has begun. Key timing targets will be February and May/June where a possible low may unfold.
Only a closing back above 760.00 would cause to raise the Dow close to the 7,000 area perhaps in February. This would be very bearish and warn of a sharp correction for 1997 possibly in the 20% range.
The Best Investment in 1997
The best investment opportunities appear to be lining up in many of the raw commodities such as crude oil and agricultural commodities more so than the share or the bond markets. These markets are extremely undervalued similar to what our computer recommended two years ago on the US stocks.
We also see that the US share market will be an excellent buying opportunity if the Dow declines to the mid-5,000 range. Gold will be another good investment, but not until at least midyear and only after a drop back to $341 by the troy ounce.
Interest rates are poised to move higher as most government budget deficits start to rise sharply in 1997.
The British pound is still on track to become the strongest currency within Europe and the Deustche mark one of the weakest. The BP/DM cross rate has some resistance at 3.02. Exceeding that area on a monthly and eventually on a yearly basis projects a rally back to 4.38.