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Why One Strategist Thinks a Major Bull Market Is Coming and What You Should Do Now

Seth Jentner06/28/2012

A chief U.S. stock strategist at Citi Investment Research & Analysis, Tobias Levkovich, says he thinks a major bull market will begin within the next year or so. I don’t know if he is right, but his arguments are provocative. Here are the six reasons he believes we're on the cusp of something wonderful.

1.  He believes the long decline in housing prices is nearing an end. When home prices finally bottom, it will mean more employment for construction workers, real estate agents and people in related industries.

2.  The U.S. is undergoing a manufacturing rebirth. Higher wages in China are prompting some companies to relocate factories to the U.S.  Ford, Emerson Electric and Intel recently brought back some manufacturing to the U.S.

3.  The echo baby boom is ready to invest. The children of the baby-boomers will soon enter the 35-39 age bracket, the time when people get serious about investing. He says the echo boom will more than make up for the pressure their parents put on stocks when selling investments for their retirement.

4.  Technological innovation is still spreading. Increased adoption of smartphones in developed and emerging countries will lead to increased spending on technology infrastructure. The U.S. still dominates tech.

5.  The U.S. is becoming less dependent on foreign energy sources. New discoveries of oil mean a near-tripling of production in the Gulf of Mexico by the end of the decade. Meanwhile, fracking and other advanced drilling techniques are dramatically increasing natural gas production. This could be a game changer.

6.  A solution to our fiscal crisis is on the horizon. In 2013, Levkovich thinks Democrats and Republicans will overcome their bitter differences and adopt a debt reduction plan that will include both higher taxes and cuts in entitlement programs.

There are a lot of skeptics who continue to pull money out of stocks. But he believes that's just dry powder for the next bull market.

As you know, Jentner does not believe in market predictions, either by the optimists or the pessimists.  I do believe, however, that if you have a diversified, balanced portfolio and take a long-term view, you can weather the storms and participate in the opportunities without suffering a permanent loss of value.

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