This analyst thinks stocks can rise for years

'The secular bull market is just starting,' Craig Johnson of Piper Jaffray says.

By MSN Money Partner Aug 7, 2014 2:05PM
Caption: Stock market graph
Credit: (© Fry Design Ltd/Getty Images)By Howard Gold, MarketWatch

I couldn't have picked a worse day to interview Craig Johnson, longtime bullish technical analyst for Piper Jaffray.

It was last Thursday, when the Dow Jones Industrial Average ($INDU) lost 317 points, and fears about Ukraine, Gaza, and Argentina's default on its debt were paramount.

When we spoke late that afternoon, Johnson sounded a bit harried but otherwise unfazed. Just two days before, his team had published a new report, "2K and Beyond/ All Systems Go." And on Thursday he wasn't giving any ground.

True, the Standard & Poor's 500 Index ($INX) had just broken below its 50-day moving average, signifying short-term weakness. (It has since gone even lower.) But that already happened twice this year, in February and May, and stocks kept moving higher, Johnson said. "These sell-offs burn themselves out," he added.

So, until there's a deeper correction that drives the S&P below longer-term support levels around 1850, Johnson is giving this market the benefit of the doubt.

"The secular bull market is just starting," he declared. And not just any secular bull market, he said, but "a big, long, powerful secular bull market" that could last "multiple years in length and [earn] a multiple of your money."

Raging bull

If you're ready to throw rotten tomatoes at your computer screen, you're not alone. Two years ago, Johnson was in a small, besieged bullish fraternity along with Laszlo BirinyiJim StackJames Paulsen of Wells Capital Management, and fellow technician Mark Arbeter, then of S&P.

Clients called him crazy, and when this column first wrote about Johnson's 2000 S&P call, the comments were downright contemptuous.

And yet, here we are two years later, and the S&P peaked at 1987.98 in mid-July. Johnson predicted the index would end 2013 at 1850. It closed at 1848.36.

Johnson may well have been lucky, but it was an astonishing call by any measure. The few investors who listened to him rather than to the gold bugs, hyperinflationists and doom-and-gloomers of every stripe have made a boatload of money. The S&P is up more than 40 percent since then.

But Johnson's not done. One reason he thinks the market is heading a lot higher for a lot longer is that pessimism is still pervasive.

"People are scared. They still hate this market. They think it's all manipulated by the Fed," he said.

Trading volume is still weak, he said, and "it doesn't feel like there’s a lot of individual investors participating today."

That's actually true: The small number of hyperactive traders at discount brokerage firms obscure the bigger picture that the vast majority of individuals are still too spooked to buy stocks. Study after study confirms that. Institutions aren't exactly euphoric, either.

If Johnson is right, stocks will rally for a long time. He thinks we're in the kind of secular (extreme long-term) bull market we saw in both the 1950s and the 1980s. Each of those runs lasted much longer than a decade.

"The secular bull market began in March of 2009 and was finally confirmed when we went through the 2000 and 2007 highs," Johnson explained.

That "confirmation" occurred in March 2013, when the S&P 500 broke above 1550, its previous all-time peak.

"When you break out of big bases, the market accelerates," he explained, and indeed, the S&P has gained as much as 28 percent since hitting that magic number.

Comparing that with 1952 and 1982, when the market also surpassed its previous high (in price only, not including dividends), Johnson said, "If history does rhyme, [this bull market] would last 10 years from 2013."

"Investors made five times their money" after 1952 and 15 times their money from 1982 to 2000, he said.

Stocks for the long run

So, if you take March 2009 as your starting point and multiply by five, that would get us to S&P 3400 before it's all over -- about 70 percent higher than current levels. Yet over a decade, that's a compound annual growth rate of less than 6 percent a year, which is not outlandish. (That's just hypothetical, by the way: Johnson hasn't published any official forecast beyond 2100 by the end of 2014. I'm not predicting that, either.)

But the continuation of the bull market, of course, depends on the economy and earnings.

"Things are definitely getting better with the economy," Johnson said. He thinks rising interest rates in years to come could actually facilitate a switch into stocks from bonds.

And since the price/earnings multiple of the S&P already has expanded, "we need earnings to come through." So far this quarter, almost 70 percent of S&P companies that have reported earnings have beaten Wall Street estimates.

Still, Johnson conceded, "we're overdue for a true correction. I would have thought it would have happened by now." (So would I, and last week, I recommended that readers trim some of their positions to reduce short-term risk.)

Johnson's definitely not advising people to dump stocks. In fact, he thinks a selloff is a buying opportunity. 

He says investing in big-blue chip U.S. stocks is the way to go for most people. "Why not be a buy-and-hold investor?" he asked.

Why not indeed? If he's right and this bull market has years to go, it would be a great boon for retiring baby boomers and others who were smart enough to keep at least some -- but certainly not all -- of their money in stocks, while everyone else was busy fighting the Fed.

Howard R. Gold is a MarketWatch columnist and founder and editor of GoldenEgg Investing, which offers simple, low-cost, low-risk retirement investing plans. 

More from MarketWatch

Aug 7, 2014 2:26PM
Aug 7, 2014 2:46PM

This boy needs to put the crack pipe down.

Aug 7, 2014 3:09PM
What I want to know is what did this guy say in 2000 and 2007? If he did not see those 2 50% corrections coming why take his advice now?
Aug 7, 2014 4:36PM
He is advising you to buy on the dip.  I like that advice.  Buy low works for me.  Also, I see nothing in market history that markets did not recover from a dip.  So one always makes $ buying on the dip and selling after the recovery.  You got a prahblum wid dat?
Aug 8, 2014 8:35AM
I think the market will go up!  And then I think it will go down.  And then up again...  You better keep saving for your retirement though, no matter if you have faith in the stock market or not.  There are other savings opportunities out there, but you'll need to make some percentage over the inflation rate or you'll be losing out.
Aug 7, 2014 3:06PM
Aug 8, 2014 9:10AM
Tomorrow...??  Maybe today or Monday..!!
Aug 8, 2014 9:04AM
Aug 7, 2014 2:44PM
What Analysts FAILED to say is-- their very existence is reliant on stocks continuing to rise for years. They seem to be going steadily down now. No wonder an idiot article like this one appears today.
Aug 7, 2014 2:44PM
"Why not be a buy-and-hold investor?" he asked. Why not indeed? If he's right and this bull market has years to go, it would be a great boon for retiring baby boomers and others who were smart enough to keep at least some -- but certainly not all -- of their money in stocks, while everyone else was busy fighting the Fed."

So you are trying to say anyone else was dumb right? First of all, there are tons of ways to Make money, speculating in stocks is just one of many. There are also tons of ways to Lose Money, stocks also happen to be one of many. So save the sales pitch to someone that was born yesterday.
Funny how we are flooded these days with folks trying to Fear Folks into stocks. Far more then those trying to fear anyone anywhere else. Buy and Hold to infinity died the Day the Global Feds went insane. Buy and hold also died when Market to Market never happened and Market to Fantasy still resides instead. Stocks are up for these simple reasons, Global Debt is up 40% since the Great Recession while interest rates are being manipulated from normalizing. That's never a good case for Buy and Hold to infinity.

In case some might have forgotten, this has been our National Debt Deficits the last 6 years.

-1,412,688   trillion   
-1,294,373   trillion  
-1,299,593   trillion   
-1,086,963   trillion 
-679,502      billions
-648,805      billions

Aug 7, 2014 4:01PM
He could be correct......Right until the Fed stops printing money and the administration lapdogs stop lying about true inflation or simply can't fudge the numbers anymore. It may happen in the next administration who knows? Can you imagine taking this debacle over as the next president? Regardless of your politics, it is going to be a nightmare and this market WILL crumble worse than 2008.
Aug 7, 2014 3:52PM
Yea right, market crashing and we should buy. Yea right! I will wait for Yellen to squeeze QE. I will wait for Russia to turn off the gas to Europe. I'm out. Stock market is way over inflated already. Time for a MAJOR correction. Sell!
Aug 7, 2014 11:03PM
Aki is still alive...Wonders never cease, this rag has not been the same lately without you..
Aug 7, 2014 4:16PM
Ho hum...Another largely worthless column. Hemming and hawing as usual. 
Aug 8, 2014 10:51AM
Consultants, experts and analysts have to mouth some words once in a while to justify their jobs.
Aug 7, 2014 10:27PM
You morons will always be broke. You all have been singing the same tune for the last several year - the market is going to tank due to Fed, or whatever. 

This correction will be over shortly, and the market will head higher!

Yuk yuk!
Aug 7, 2014 5:44PM
The DOW could go higher after it drops close to 15,000!
Aug 8, 2014 10:18AM
Its Friday and very little has changed down here, do not, say again, do not get fooled by another sucker's rally, we've been seen them too much too often; as soon as these scumbags take over the floor we will start dropping as usual...This will be the third week in a row these manipulators bring markets down....Enough to say these last 3 weeks they have made more money than the entire year.....Be cautious folks, cheating still pays on Wall Street....More later.
Aug 8, 2014 12:32PM
Dow 40,000!   Yeah, right. 

Still, he's basically right.   Buy blue chip (like S&P indexed) and be prepared to hold through the bad times, and you'll do fine.   
Aug 7, 2014 3:42PM
Is he talking about stocks in the warehouse?
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

125 rated 1
264 rated 2
485 rated 3
679 rated 4
640 rated 5
617 rated 6
632 rated 7
493 rated 8
276 rated 9
153 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.