Stocks reflect the early days of one of the biggest bull markets in history, hedge fund manager says

• Hedge fund manager Eric Jackson believes an “everything rally” in the stock market could happen.

• Jackson compared the economic environment to the 1982 bull market, when interest rates fell and the economy grew.

• Interest rate cuts, economic growth and changes in the yield curve favor risky investments.

The stock market’s relentless rise could turn into an “everything rally,” says hedge fund manager Eric Jackson of EMJ Capital.

In an interview on Tuesday, Jackson told CNBC that the current environment of economic growth and interest rates is reminiscent of the early days of the 1982 bull market, one of the stock market’s all-time best performers.

In the first 10 months of the 1982 bull market, the Nasdaq rose 107%, Jackson noted.

“The last time the yield curve was inverted for so long and finally broke upward, as we’ve seen recently, in a favorable economic environment where interest rates are falling, was August 1982,” Jackson said.

He added: “And when that happened, there was a stock market rally that lasted 10 months. Nasdaq was up 107% in those 10 months. So I think we could see an all-out rally.”

That would mean everything from small-cap tech stocks to mega-cap tech stocks would move higher together.

The combination of Federal Reserve rate cuts, resilient economic growth and non-inversion of the yield curve generally creates a favorable environment for risky investments, especially if inflation remains subdued.

When a similar scenario played out in the summer of 1982, the S&P 500 launched a five-year bull market that delivered a total return of 229% and an annualized gain of 26.7%, the second-highest annualized gain ever, according to data from First Trust.

The non-inversion of the two- and 10-year U.S. Treasury yield curve is significant because it has been in negative territory for about 26 months, the longest in history.

The yield curve finally turned positive earlier this month.

The yield curve moving back and forth between positive, negative and positive is considered a reliable recession indicator, but with the economy still in good shape, this time seems to be different from 1982.

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