“Bull markets climb a wall of worry.”
– Ancient Wall Street Proverb
Ever since the “Tariff Turmoil” back in April, the stock market has continued its bullish trend and reached several new highs over the last few months. In fact, as we write this on September 11th, the S&P 500 is trading at yet another all-time high value of 6,588, to the delight of financial journalists everywhere. New market highs make for great headlines, and the media always has a field day reporting these lofty levels.
There is an old saying on Wall Street that “bull markets climb a wall of worry”. Perversely, new market highs are often accompanied by angst among investors, who fear the market is “too high” and may treat these moments with skepticism, doubt, fear, and even hatred. A recent headline from The Wall Street Journal gave us a good chuckle and is all the contrarian proof we need that the bull market in equities is alive and well.
U.S. stocks are now pricier than they were in the dot-com era
Inevitably, the media publicity that accompanies a new market high tends to inspire a chorus of calls from market pundits and analysts that the stock market is overvalued, and that investors must beware of these inflated market levels and prepare for an imminent correction or bear market. If you turn on CNBC this afternoon to catch up on the financial news, you will no doubt see dozens of highly intelligent talking heads using various complicated valuation metrics to prove that the stock market is way too expensive and is on the verge of a major crash.
One of the most sophisticated valuation methods out there is called the CAPE ratio. Even the name sounds academic and intimidating: The “Cyclically Adjusted Price to Earnings Ratio” is a complicated formula developed by some very smart academics to determine the proper valuation of the stock market. The problem is that it is nearly useless as a tool for making investment decisions.
Check out our latest video, in which we discuss these topics and the danger of falling for the fallacy that equity valuations can be used as an effective market timing tool. We also offer some new ideas on how a true, long-term equity investor will use this time as an opportunity to prosper.
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Helping those you care about
The purpose of our “Great Investors” series is to help you become an outstandingly successful investor by following the principles of patience and discipline, which are required to prosper as an equity investor. No doubt, “Mr. Market” periodically tests that patience and discipline by subjecting investors to emotional swings, which can cause many to make a big mistake. It is only those who faithfully adhere to a rock-solid investing philosophy who will pass those tests.
Successful investing, while fundamentally simple, will never be easy. You may have a family member, colleague, or friend who perhaps has not fared as well recently, and who you feel might have benefited from the sort of advice you are receiving. Should that be the case, we would certainly appreciate your introducing us to them. We very much enjoy working with you and welcome the opportunity to offer the same level of planning and service to people whom you care about.
Join us on October 1st at the Triple Crown
Please save the date for our next “Great Investors LIVE” event on October 1st, and feel free to bring along a friend or family member. Enjoy cocktails and hors d’oeuvres while we give a brief talk summarizing our outlook on current events. There will be ample time for Q&A and discussion to address any additional questions you may have.