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.
- Forget Everything You Know About Inflation
- China Trade War Sparks Fear But Not Stock Losses
- Surprisingly Good Productivity, Jobs, Inflation And Trade News
- Stocks Break Record High On Economic Surprises
- U.S. Leading Indicators, Retail Sales, And Atlanta Fed Forecast Signal Strength
- S&P 500 Closes Near Record High Amid Growing Ebullience
- An Early Indication The Economy Is Stronger Than Expected
- A Spectacular Quarter For U.S. Stocks Just Ended
- Real Economy Strengthens, Yield Curve Inverts And Mueller Report Drops
- Despite Crises, Economic Fundamentals Are Strong
- How Misperceptions Spread And Cause Confusion On Money Matters
- Real Spending Power Grew Twice The Rate Of The Last Expansion
- Global Growth Forecast Slows, But U.S. Outlook Remains Stable
- How Long Does It Take To Be A Long-Term Investor?
- Five Observations About The CBO's New Long-Term Debt Forecast
- Fed Apology, Strong Job Growth Bolster Stocks
- Despite Grim Headlines, Economic Growth Is Intact
- Despite December Turbulence, Economy And Business Optimism Were Strong
- Latest Forecasts Show Economy Is Doing Okay
- A Poignant Moment In Financial History Sparks Stocks