Stock Market Hits New Highs – What to Do?
The U.S. stock market has reached a new all-time high, with the S&P 500 Index eclipsing 2,930. The index, which tracks the broad U.S. large cap stock market, is now up nearly 11% for the year. The Dow Jones Industrial Average trades above 26,600. While September and October can often bring more volatility to the stock market, so far we have experienced calm conditions in 2018.
The big-picture question is whether the U.S. stock market gains of this year, and the prior nine years, are sustainable. Looking at the fundamentals, the U.S. stock market advance this year actually appears quite healthy. While the market is up 11% year-to-date, earnings growth of U.S. companies has been even better. Through Q1, JP Morgan estimates that U.S. earnings are up 27% compared to the same period in 2017. So on a price to earnings basis, the U.S. market is actually cheaper today than it was at the beginning of the year, in spite of its 11% gain.
The investor community continues to worry about the possibility of a recession, or at least a slow-down, over the coming years. And this is on our minds too, in spite of the good economic news that we continue to receive. We continue to work with our clients in preparing for more volatile markets in the upcoming years. Indeed, we have even named the process—The Recession Prep Checklist. In a letter that we sent out to clients and associates in recent weeks, we highlighted the potential steps that you should consider taking with the stock market at all-time highs. We welcome your phone call in discussing the steps that you may wish to take as part of your retirement plan.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Stock investing involves risk including loss of principal.