Markets: Slow and Steady

with No Comments

TurtleIt has been 332 days since the Standard & Poor’s 500 (S&P 500) Index experienced a 5 percent drop, reported Barron’s. If there isn’t a selloff on Monday or Tuesday, this will become the longest rally without such a drop.

During this period, the Index has gained 33 percent. Think about that for a moment: 33 percent over 332 days. By Barron’s calculations, the market has gained less than 0.1 percent per day. That’s a very slow rate of increase, relatively speaking. The longest-ever rally without a 5 percent drop, which began in November 1994, was accompanied by a gain of 56 percent or 0.17 percent per day.

The most recent issue of The Economist pondered the phenomenon of the slow-as-molasses bull market that has pushed asset prices higher:

“No one would mistake the bloodless run-up in global stock markets, credit, and property over the past eight years for a reprise of the ‘roaring 20s,’ or even an echo of the dotcom mania of the late 1990s. Yet only at the peak of those two bubbles has America’s S&P 500 been higher as a multiple of earnings measured over a ten-year cycle. Rarely have creditors demanded so little insurance against default, even on the riskiest ‘junk’ bonds. And rarely have property prices around the world towered so high…the world is in the throes of a bull market in everything.”

It would be a mistake to assume asset prices will continue to move higher indefinitely. One characteristic that may signal the onset of a bear market is investor euphoria, and we haven’t seen that. The most recent American Association of Individual Investors’ Sentiment Survey showed 2.3 percent more investors were bullish last week, pushing the total to 35.6 percent. That’s still well below the historic average of 38.5 percent.

Last week was punctuated by a senseless shooting. Our hearts and prayers are with the people of Las Vegas.

Sources:

http://www.barrons.com/articles/stocks-hit-new-highs-as-the-bull-trots-steadily-on-1507344223 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-09-17_Barrons-Stocks_Hit_New_Highs_as_the_Bull_Trots_Steadily_On-Footnote_1.pdf)

https://www.economist.com/news/leaders/21730019-ultra-loose-monetary-policy-coming-end-it-best-tread-carefully-asset-prices-are (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-09-17_TheEconomist-Asset_Prices_are_High_Across_the_Board-Is_it_Time_to_Worry-Footnote_2.pdf)

http://www.investopedia.com/articles/stocks/10/5-steps-of-a-bubble.asp

http://www.aaii.com/sentimentsurvey

Disclaimer

*These views should not be construed as investment advice. * The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * This newsletter was prepared in whole or in part by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Skygate Financial Group. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.