The Next Bull Market Starts ... Tonight?

How President Obama could kick off a market rally.

Ryan McLimans
Ryan McLimans
Jan 20, 2009 at 12:00AM
Other

Today, President-elect Obama officially became President Obama. One of his first actions will be to sign his epic stimulus plan into law. If all goes according to plan, this event marks a rare chance to get in on the ground floor of what I believe could prove to be a government-fueled market rally.

Money on the sidelines
But first, consider this: Investors are sitting on a mountain of cash right now -- $8.85 trillion, to be exact. They're sitting on the sidelines ... waiting for something.

That mountain of cash represents a nearly two-decade high. According to Bloomberg News, the ratio of cash to market value is at its highest level since 1990!

Is that much cash enough to fuel a monumental rally?

Cash, meet catalyst
I think so -- and I think the rally it creates will produce investment wins we'll still be talking about decades from now.

The president's unprecedented plan -- what The Wall Street Journal calls "Obama's New Deal" -- is designed to reignite the economy and address urgent infrastructure issues that can no longer be ignored. These problems caused blackouts in New York City, the levees failing in New Orleans, Minneapolis's I-35W bridge collapsing into the Mississippi River, and on and on.

But this isn't the FDR dam-building of the 1930s. This is a vast 21st-century project designed to improve existing infrastructure and invest in modern technologies like clean energy and broadband -- creating millions of jobs along the way. And a select few industries and companies could benefit disproportionately.

Which companies benefit most?
You probably recall how energy independence was a hotly contested issue on the campaign trail. It should be no real surprise that Obama's "New Energy for America" plan calls for an estimated $150 billion investment in "repowering" America -- specifically with alternative energy projects.

But before we flip the switch and go 100% green, we need a bridge to our clean energy future. This means boosting production of "alternative energy" sources we can tap right now. One obvious beneficiary is natural gas, and one company in a good position to cash in is the No. 1 producer of natural gas in America, Chesapeake Energy (NYSE:CHK).

You see, unlike the nebulous "bailout plans" that are propping up financial institutions such as Citigroup (NYSE:C) and Bank of America (NYSE:BAC) and struggling automakers like General Motors (NYSE:GM) and Ford (NYSE:F), Obama's New Deal isn't a bailout. It's a massive investment that will hand billions of dollars' worth of projects to healthy, competitive companies like Chesapeake Energy. That endeavor's worth investing alongside.

Equitable access to information and technology
But Obama's plan doesn't stop with clean energy. It also seeks to improve the lives of Americans everywhere with real, tangible benefits -- like high-speed broadband Internet access that can narrow the so-called digital divide.

Believe it or not, about 50% of Americans still don't have high-speed Internet access. That means that the United States -- where the Internet was invented! -- ranks 15th (slightly below average) in terms of adequate citizen access to broadband service.

Just as Roosevelt's New Deal brought electricity to rural areas during the 1930s, Obama is planning to bring high-speed broadband Internet access to "every community in America," to ensure that even lower-income areas have access to information and technology resources. That could be good news for companies like Comcast (NASDAQ:CMCSA), who could vastly expand their customer base and broadband infrastructure to meet Obama's ambitious goal.

It's also good news for IBM (NYSE:IBM). When Obama's transition team asked IBM whether investing in Internet infrastructure could create jobs, CEO Samuel Palmisano reported that expanding broadband access, digitizing health-care records, and improving the electrical grid could create almost 1 million new U.S. jobs!

And it's no coincidence that Obama reached out to IBM. As a world leader in building energy-efficient "green" data centers, it's well-positioned to scoop up some of those lucrative government contracts for expanding our broadband infrastructure.

Are you in the right stocks?
But clean energy and Internet infrastructure are only the beginning of what Obama plans to achieve -- and his New Deal is projected to create between 3 million new U.S. jobs by 2011!

In fact, if the president's jobs plan moves along, economist Mark Zandi told the Journal that by 2010, what's currently predicted to be a 1.6% decline in gross domestic product could turn into a 1.9% increase.

So why not wait until 2010?
Let me be clear: No one knows for certain when the next bull market will start. One thing I do know, however, is that by the time you read about a recovery in the paper, the lion's share of the profits will already be booked.

That's why right now may be your golden opportunity to get in early on the next bull market.

Yes, I believe in buying stocks in these uncertain times, but not just any stocks -- I'm specifically talking about stocks with competitive advantages, competent managers, and tailwinds from the Obama New Deal.

But you must act now.

New deal, familiar Fools
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Ryan McLimans owns shares of IBM. Chesapeake Energy is a Motley Fool Inside Value selection. Bank of America is a former Income Investor recommendation. Yes, The Motley Fool can have a disclosure policy.