What Goes Up Might Stay Up

What Goes Up Might Stay Up

Recent financial headlines have focused on the US stock indexes hitting all-time high values most of the days following the US election. You may be experiencing hopes, fears, and concerns around this. Because of this run up, some are saying and you might think that a major collapse is ready to occur.

To keep this short, I am going to summarize several reasons that, while this is always possible, a collapse is not likely at this time.

Relatively over time, current values are not that high. The S&P 500 is less than eight percent above its highs of mid-2015. The Dow 30 has performed best lately, but is less than nine percent above its 2015 high point. The Nasdaq 100 is less than five percent above its 2015 highs. It is just back up to the level it reached in the 1999-2000 period.

There are trillions of dollars in the bank accounts of Americans, far more than historically usual. This is not a bubble driven up by anyone’s greed or irrational enthusiasm. Instead, many supposed experts have been very bearish for months now. That is a positive, not a negative, sign.

The eighth year of a president’s term is usually poor or mediocre. When the White House changes hands to a new President, regardless of party affiliation, the first 18 months are usually at least mildly positive. In the current situation, with the administration showing a pro-business, pro-growth bent, we expect the next 18 months may be even better than normal. An economist who is often right, and one we respect a great deal, just gave his reasons why the Dow can rise from its current 19,800 plus to 36,000 in five years, about an 82% gain.
Having said all this, the greatest value an advisor can help provide you is to be available and to help you stay level-headed during the major pendulum swings from fear to greed. The worst financial decisions are often made at exactly the wrong times of a market cycle. The media is trying to sell something even if it is only to keep your attention and fear is easier to sell than hope. I think we are a long way from greed in the financial markets.

I do hope we all can enjoy the ride a little more than we have these past few years.

(Advice is intended to be general in nature. Past performance is no guarantee of future performance.)

December 14th, 2016|Categories: Personal Finances|