Investment Wisdom At A Poignant Moment In History
Published Friday, September 14, 2018 at: 7:00 AM EDT
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.
- After Breaking Records For Six Weeks, Stocks Dropped -2.3% Friday
- Already Higher Than Ever, Leading Economic Index Surged Again In October
- Five Observations For Investment Planning For The Decades Ahead
- Financial Economic Outlook
- S&P 500 Closed Friday At Record High Again On Strong Earnings Reports
- With Economic Recovery Intact, Stocks Are Near Record Again
- Are The Five Stocks Driving The Market's Great Returns Overvalued?
- Despite Gloomy Jobs Report, The Economic Outlook Remains Bright
- S&P 500 Rebounded Today After A Difficult Week And Month
- China Financial Contagion Fears Come And Go In A Few Days
- August Retail Sales Indicate The Recovery Is Intact
- This Week’s Financial Economic News
- Latest Financial Economic News For Investors
- After Fed Inflation Policy Speech, Stocks Closed At New Record High
- Stocks Closed 1% Off All-Time High; Strong New Economic Data
- Stocks Broke Record High Again This Week
- U.S. Jobs Picture Improved, Covid Variant Risk Declined, And Stocks Closed Week At Record
- This Week’s Economic And Investment News
- Positive Earnings, Housing, and LEI News; Stocks Closed Week At A Record
- Today Versus Post-War History Of U.S Economic Cycles
- Stocks Surged 1.1% Today, Closing At A Record High For The Third Straight Week
- Strong Jobs Report Confirms Recovery
- What's Ahead For The Second Half Of 2021?
- Despite Strong Economic News, Stocks Dropped This Past Week
READY TO TAKE THE FIRST STEP?
Schedule your no-charge, no-obligation Introductory Phone Call.