We have seen other periods of time where the markets have been steadily rising. In those times, we remember having to remind people that it will not last forever and to keep some risk control in your portfolio. This bull market seems different. No one seems to trust it. Every time we hit a new market record high, investors seem to be collectively asking, “can it go any higher?” We do not know when this market will hit a top and suffer a major correction. No one knows that. Keep the following in mind as you invest:
- After a 30% advance in the S&P 500 in 2013, and warnings of bubbles, the market continued to advance.
- Stock values are heavily influenced by earnings, and with more than half of the S&P 500 companies reporting third quarter results as of Friday, more than 75% have surpassed consensus analyst expectations.
- The Institute for Supply Management (ISM) Manufacturing Index rose 2.0 points in September to 60.8 (anything above 50 means growth), the highest reading since May 2004.
Frankly, we prefer the caution and fright of today’s investors over the “irrational exhuberance” of investors during prior bull markets. Always keep risk control in mind in your portfolio. Don’t ever abandon it. But don’t be groaning every time the market hits a new record high.
U.S. ECONOMY CHUGGING ALONG:
Despite two major damaging hurricanes, the U.S. economy has now posted its best six-month stretch of growth in three years. According to the U.S. Bureau of Economic Analysis, the U.S. economy grew 3.0% in the third quarter of 2017 as measured by Gross Domestic Product (GDP). This comes on the heels of 3.1% growth in the second quarter. Consumer spending on durable goods (goods designed to last three years or more) rose at an 8.3% annual rate. Equipment spending by businesses rose at an 8.6% annual rate. Since the recovery began after the Great Recession, the average rate of growth has been 2.2%.
(With thanks to Casey Price, Esq. at pricelawpractice.com). The Medicare 2017 open enrollment period started October 15 and goes through December 7. During this period Medicare eligible Americans can review their Medicare coverage and make changes for the coming year. Medicare recipients may even be able to, depending on circumstances, switch out of a Medicaid Advantage plan back to traditional Medicaid A/B and a Medicare supplement policy. All Medicare recipients should review their options because better coverage may be available for 2018.
LARGEST ECONOMIC RISKS:
According to the World Economic Forum, which surveyed 750 experts, the following are the biggest global risks that could cause economic (and thus market) disruption.
- Extreme weather events
- Large-scale involuntary migration
- Natural disasters
- Terrorist attacks
- Data fraud or theft
- Illicit trade
- Man-made environmental disasters
- Interstate conflict
- Failure of national governance
Are you cheered up now?
U.S. ECONOMY CHUGGING ALONG: https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm; http://www.calculatedriskblog.com/2017/10/bea-real-gdp-increased-at-30-annualized.html; https://www.wsj.com/articles/u-s-gdp-grew-3-in-third-quarter-1509107670
LARGEST ECONOMIC RISKS:https://www.weforum.org/agenda/2017/01/these-are-the-most-likely-global-risks-2017/
SPOOKY MARKETS?: https://www.wsj.com/articles/asian-markets-rally-on-u-s-earnings-european-stimulus-1509072863; https://horsesmouth.com/worries-abound-as-stocks-reach-new-highs