Investment Wisdom At A Poignant Moment In History
Share prices in America's 500 largest public companies closed Friday at 2904.98, near the all-time high.
The nine-year old bull market exploded in the last 33 months from 1810 to 2901. After a runup of more than 40%, the S&P 500 seems ripe for a fall, according to the narrative popular in the financial media.
What should you expect from stocks?
The popular narrative in the media is that the bull market is about to end, and that may be true. But it belies the long arc of history.
Despite what feels to some like a stock market that is overvalued, the S&P 500 actually has reverted to its long-term trend rate of appreciation, shown in the dotted red line.
Since January 1957, owning a share in America's largest 500 publicly-traded stocks showed a compound annual growth rate of 6.9% — nearly doubling in value every decade in the last six decades.
Things could be different this time. Past performance is no guarantee of your future results. That's the risk you take in America's capitalist system. For taking that risk, however, investors have earned a premium over the return on virtually riskless 90-day U.S. Treasury Bills.
Point is, in crises through the decades — even the cataclysm of 9/11, when many Americans thought life would never be the same again — the nation and U.S. shareowners recovered, and the value of their investments soared higher.
Rebalancing — allocating to asset classes that have not worked lately — is smart.
In fact, if you do not have a year or two of cash set aside to fund your current monthly expenses, then maybe you do want to raise some cash.
Keep in mind, the stock market may be on the cusp of a bear market or even a double-digit "correction" of 15%, but the economy is very strong, and the bull market could go on for years longer.
If you are a long-term investor, try to see beyond the next bear market, correction or major obstacle to the progress of humanity.
That's this week's bit of investment wisdom at a poignant moment in history.
This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.
This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.
2019
-
An Unusual Constellation Of Economic Surprises
-
Longest U.S. Expansion Keeps Rolling
-
Retirement Income Reality Check
-
Find The Major Economic Trend Hidden In This Picture
-
Is The New Record High In Stocks Irrational?
-
Stocks Break New Record; Economic Outlook Clears
-
Despite Frights, Can The Expansion Continue?
-
Retail Sales Coverage Reflected The Narrow View Of The Media
-
Small-Business Optimism Declines But Remains High
-
Analysis Of New Employment, Manufacturing & Service Economy Data
-
Quarter Ends Well Despite Trade War, Inverted Yield Curve & Political Crisis
-
No Recession But A Slower Pace Of Growth
-
Fickle Financial Headlines Brighten
-
Economy Gets Bad Press Again
-
Europe's Growth Problem And Your Portfolio
-
Stocks Dropped 2.6% On Friday, As Reality Gap Seemed To Widen
-
A Prudent Perspective On Recent Volatility
-
A Tale Of Two Economies
-
Amid Worries, New Equity Risk Premium Data Explained
-
GDP Rose More Than Expected; Stocks Top Record Again
-
Slower Growth Confirmed By June Leading Economic Indicators
-
Stocks Closed At A Record High; Should You Worry?
-
Amid Record Stock Prices, Fed Policy Is A Risk
-
Uncle Sam Delivers A Strong Economy