The US continues to see a steady acceleration in labor productivity. This is generating economic outperformance and efficiency gains on a global scale, which is reflected in exceptional equity market performance.
– Troy Ludtka SMBC Nikko
Since our last commentary addressing the potential “overvaluation” of the stock market, U.S. stocks have continued to rise, and it appears that many investors are struggling to understand why.
Lately, it seems as though the S&P 500 rises almost every day and continues setting new highs. In fact, as we write this, the S&P 500 is trading at yet another all-time high value, over 6,750 for the first time in history, to the delight of financial journalists everywhere. As mentioned in my last commentary, new market highs always make for great headlines, and the media always has a field day reporting these lofty levels.
Investor emotion can be a funny thing. It seems strange, but when markets go up, instead of being happy or grateful, most investors start to get worried. They find themselves asking: Why is it going up so much? Is it overvalued? Are we in a bubble?
I’ve found that many investors can’t understand why the market is rising, and so they don’t believe it. You even hear money managers or pundits on TV talking about how the current growth is unrealistic, fake, or not to be trusted. It’s as if we are all scratching our heads trying to make sense of this growth, and can only conclude that it’s not real, and it must be a speculative bubble bound to burst.
Forget the bad news you see on TV. Let’s talk about the good news that’s actually happening in the U.S. economy. Let’s talk about why the market is really going up. In my opinion, there are three very important secular economic trends unfolding that are all very positive, and which you’ll rarely hear about in the media.
Please check out our latest video, where we discuss these three reasons and how to gain perspective on the recent growth in equity values. Importantly, we also offer new thoughts on how a true long-term equity investor can 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 always 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 were receiving. Should that be the case, we would certainly appreciate your introducing us to them. We very much enjoy working with you and would welcome the opportunity to offer the same level of planning and service to people whom you care about.
You are more than welcome to bring a friend or family member to our next Great Investors LIVE event, or to share a subscription to this article series.
In case you missed it
In case you missed our last “Great Investors LIVE” event on October 1st, please feel free to watch the discussion here.