Another Take on Valuation - It's Not As Bad As You Might Think

Now that the temps have cooled I am offering some weekend reading giving a contrarian view of the currently elevated levels of the indexes, offering in effect the view that these high valuations may not be all that unusually high after all, at least not in an historical context.  For those who may be leaning towards the bears (if not already hibernating), this article from Heritage Capital Research may provide some balance.  Enjoy what's left of the weekend.

S&P 500, Nasdaq hit records on tech lift

Third straight records for both the S&P and Nasdaq, eight straight quarters of gains for S&P and Dow, five for Nasdaq.  The bull market seems alive and well with the Dow up 23 points for the day.  There is talk of Trump replacing Yellen as Fed Chair but with the cautionary note that the market has already priced in Yellen staying on and that valuations will surely change if she leaves.  For a market that values predictability, that’s not good.  Volume was close to recent averages at 6 billion.

S&P ekes out record on healthcare gains, tax plan hopes

A third tumultuous day with first a 50 point drop out the gate followed by a hundred point rise to close 40 up.  For the second day, the driver has been hopes for tax reform which gave a boost to financials as among the expected beneficiaries.  Healthcare also got a boost plus the news that Q2 growth had been better than previously reported.  S&P P/E is still 20 percent higher than historical long-term averages.  The bears say a major correction is coming, the bulls say things will keep going as long as there’s no other reason than historical averages for them not to.  Volume was below average at 5.8 billion.

Wall St. gains on financials boost, tax hopes

Another very turbulent trading day with the Dow zooming up over a hundred right out the gate, then falling just as precipitously about 110 soon after before regaining ground to close 56 up.  There are days when the market sells off over the threat of rate hikes, and other days when investors decide that rate hikes will be good for the banks.  The latter was the case today with the financial sector getting a boost aided by anticipation of tax reform, though details as always remain scant.  Other good news included an increase in factory orders.  Volume was above average at 6.5 billion.

Wall St. ends flat after Yellen; tech shares bounce

A turbulent trading day with the Dow zooming up 90 points right out the gate only to drop like a rock again almost immediately and lose everything plus another 11 before day’s end.  After four straight losses, Apple finally had a good day that boosted the tech sector but Yellen affirming the likelihood of a December hike balanced all that out.  Consumer confidence for September and home sales for August also fell.  Volume was back to below average at 5.8 billion.

Wall St. declines on tech selloff, North Korea concern

In all these years, investors have not yet figured out that whenever Apple introduces a hot new product, there are always bumps in the road.  So beyond the continuing noise surrounding North Korea, the market continues to get hit by Apple stock dropping due to problems with the release of the new iPhone.  The market was down 140 points mid-day before recovering to a 53 point loss with safe-haven assets like gold picking up as often happens when crisis lurks.  The VIX was up to just over 11 (so it’s worse than it was, but keep in mind that anything under 30 is considered good) and the losses from Apple were more than made up for by gains in oil which enjoyed its 16^th gain in a month and a two-year high with global suppliers finally committing to cutting down the glut.  Volume was above average at 6.4 billion.

Succinct Summation of Week’s Events 9.22.17 (plus Green Assets)

The usual Sunday night weekly summation is below with all three indexes again making new all-time highs.  The bonus this Sunday is a Bloomberg article exploring the issue of ethical investing.  No, this doesn't mean insider trading.  Rather it refers to a developing trend where the stock market can represent an opportunity to support the issues and companies that you feel are ethical, that indeed there are ways to be an activist citizen beyond the ballot box.  This particular article focuses on companies that have active environmental policies for investors who agree with that position.  WealthTrack had an episode on this same topic a few weeks ago entitled, "Socially Responsible Investing," and I will plan to make a brief presentation on this at the October meeting.