Richard Bernstein: ‘Greatest Bull Market of Our Lifetime’

So what kept them out for so long? Bernstein listed the following reasons:

• Inflation
• Budget deficits and debt
• Slowing profit margins
• Runaway monetary policy
• Oil prices
• GDP growth between 0% and 2.5%
• Tax policy
• Sovereign debt
• Federal entitlements

"Sound familiar? I don't say to discount any of these completely; they are all still important.  All I'm saying is don't think like a politician; don't listen to Washington. Think like an investor. It's not about a good economy or a bad economy.  It's about whether the economy is getting better or getting worse."

In the 1980s, he continued, everybody worried about the items just mentioned. When they realized it really didn't matter, it was the "eighth or ninth inning. At that point it was too late."

Posting another slide that listed the signs of a typical bear market, he argued the following: 

• Fed tightening—Fed tightens and the yield curve is inverted. Is the fed about to tighten? Unlikely.
• Valuation—Is the stock market over valued? No, according to our models.
• Overenthusiasm—Is there overenthusiasm? It seems quite the opposite. Companies are actually still hoarding cash. Wall Street strategists are recommending the lowest equity waiting in nearly 30 years.

"We're seeing continued outflows from domestic mutual funds into emerging markets. Recently, these flows broke a record for the most in history. Uh, oh; there's that certainty."

The United States is a great growth story, he argued.

"The Russell 2000 index has the greatest potential for growth of any index and a world," he said before conceding, "but I know what you're thinking, you don't believe it. We trust numbers coming out of China and Brazil, but not the Russell 2000? C'mon."

He the pointed to three equity themes his firm has identified:

• American industrial renaissance—Executives are realizing the true costs of outsourcing are too expensive. As a result, jobs are flowing back to the United States.
• It is early in the cycle for Europe
• Japan is reflating 

He also added one fixed-income theme:

• Treasuries as a diversifying asset class. They are the only major asset class negatively correlated to all other asset classes. 

"The bottom line is that opportunities exist with fear and indecision," he concluded.