Spinning The Record
Record high? Depends on your perspective
By Steven Higgins, Financial Advisor, Principal
The Federal Reserve’s decision last Thursday to leave the benchmark rate unchanged as well as leave the door open for future rate cuts paved the way for the S&P 500 to mark a new record close of 2,958.* While the headline grabbing record garnered much needed positive attention, it also reminds us how long we have been in about the same place. For the better part of a year stocks have weathered onslaughts of trade concerns, global growth fears, and interest rate angst. So, maybe the fact that we are still hanging on to record type numbers is pretty darn good. The truth is, we are seeing the struggle between what is and what might be. The economy is strong by anybody’s measure and the case for stocks is hard to argue with. At the same time, the fear of another whipsaw move by the White House leaves possible the chance that the blue skies could become a storm with a single tweet.
Here are some anecdotes to illustrate where we are:
Since the correction bottom on December 24th of 2018, the S&P 500 is up 25.28% (ycharts.com)
Comment: To all those prognosticators who foretold of further market doom … wow, you blew that bad.
The current Price to Earnings Ratio of the S&P 500 is lowest it has been in 5 years at 18.94. (ycharts.com)
Comment: So … stocks aren’t overvalued? The cumulative return of the S&P 500 over the last 5 years was +50%. (ycharts.com)
The S&P 500 is up just .54% since the previous high of set on September 21, 2018. (ycharts.com)
Comment: I’m not experiencing “euphoria”
The current Fed Funds Rate is 2.25%. At the market high in 2000 the Fed Funds Rate was 6.25% and at the high of 2007 it was 5.25%. (Federal Reserve)
Comment: The Fed is not tight. Chill out.
The current unemployment rate is 3.6% which represents 5.8 million people. There are currently 7.4 million job openings in the U.S. (Bureau of Labor & Statistics)
Comment: Wait, what? There are more job openings than unemployed? Yes.
More on these crazy unemployment numbers. The last time we saw these kind of numbers was in the 1960s. The entire workforce in 1960 was 69 million people. Massive economic expansion compounded by women increasing their presence the workforce has ballooned the entire workforce to 160 million people. So, 3.6% unemployment today is a big deal. (Bureau of Labor & Statistics)
Comment: Yes. Big Deal.
*Source: CNBC
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through HD Wealth Strategies, a registered investment advisor and separate entity from LPL Financial. 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. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
