By Alan Steel
With all the Trump turmoil and impeachment murmurings, Brexit polls and focus on European and emerging markets, interest rate rise navel-gazing, funds flowing into ETFs and Index Trackers (read: Vanguard), French elections and “Sell in May” mantras, you’d think an Index like the S&P 500 would be feeling the burn just now.
(I’m out of breath just writing all of that…)
But the S&P, long considered the best gauge for large cap US equities, has been marching upwards for over eight years now.
Have a look at the 5-year view, including just recently breaking through the (mostly emotive) 2,400 marker:
Steady as she goes, eh?
And now that this corporate earnings season is just about over – and represented itself fairly well particularly considering Q1 of 2016 was the worst start to the year in eight decades via energy write-downs – here’s another perspective about inflation-adjusted earnings.
The folks over at Chart of the Day have offered up the below chart and commentary:
“Today’s chart illustrates the dramatic nature of the earnings plunge during the financial crisis as well as the recovery that followed – a recovery that took earnings from levels not seen since the Great Depression to a new record high. More recently, however, S&P 500 inflation-adjusted earnings declined significantly. On a positive note, S&P 500 inflation-adjusted earnings have been trending higher over the past several months and have just surpassed their credit bubble peak.”
And all of this just goes to show you two things:
1) In the words of Mike Williams, “when you see a particular sector being trashed, just remember the cries of Armageddon during the crude oil crunch. Then take advantage of the situation,” and
2) This market has endured a great many economic, political and social upheavals since the 2008/09 recession turned into a recovery. And while that recovery and the new bull that followed in late 2013 has been slow in the making, it’s also been record-breaking and reasonably steady.
It seems that all these new major index all-time highs have been happening everywhere (except in the headlines).
So while corrections and recessions are cyclical events – history shows there have been 15 Bear Markets since World War 2 (falls of around 20% or more in the US and elsewhere) – maybe, just maybe, we’re not giving the current bull the credit that it’s due.
There’s underlying strength in this market, but the media, most commentators and the subsequent negative sentiment of the investor herd could make you believe otherwise.
So if you want help tapping into the market’s true value, ignoring the headline noise and getting to the facts underneath it, try looking out for some advice from an adviser with a long track record of success…and can translate the jargon into common sense planning.
You’ll probably be happy over the long term that you did.
And after all folks, it’s your money we’re talking about here.
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