It certainly is evident to me that we are most likely in, and will continue to be in, a period of rising interest rates for the foreseeable future. I think it is very informative to see how stocks have performed in a rising interest environment. Conventional wisdom says that rising interest rates are not good for the market and I would tend to agree.
So far this year, earnings growth for the S&P 500 has been quite outstanding. We are looking at 20% + at least, for the first half of the year. It would be nice if this type of growth could continue infinitum. However, intellectually we know, that type of growth cannot continue forever. It is quite possible that we could be nearing peak earnings growth but not necessarily peak earnings.
I came across this chart that I thought I would share. It is nothing I didn’t know, but seeing it on paper is rather really illuminating. Sure, putting your money in Treasuries seems safe from a credit stand point, but there is a cost with today’s rates so low.
I came across the charts below and thought it would make a good discussion on the whole Risk vs. Return argument.
The bottom line is that while in any one year returns of asset classes are random, the corresponding risk of any particular asset class is more predictable. If you study the charts you can surmise that the most potential returns can also be the most risky.
I thought I would revisit a golden oldie from my blog post past because I feel it is more important than ever. It’s the question I am most often asked.
What is the most important quality you need to have to be a successful investor?
The answer? Patience.
One of the measures I look to when valuing the stock market (S&P 500) is the Price/Earnings (P/E) ratio. It is a good gauge to see how expensive or cheap stocks are, compared to historical averages.
The market has come a long way since that dark bottom in March of 2009, yet we are now pretty close to our 25 year average in forward P/E ratio valuations.
I have long contended the old axiom, “the market climbs a Wall of Worry” is profound indeed. I came across this chart that illustrates this fact so well! Just take a look at the chart just going back from the onset of the financial crisis and it is really rather amazing. Look at all the events to worry about on that chart. It practically fills up the whole page.
I came across the chart below and though it would be timely to show you.
I know the recent volatility can be unnerving, but you can see from the chart below it is really nothing new. It just seems that way because we had previously gone through a period of unusually low volatility which may have bred complacency. Check out the chart below and you can see some of the large and frequent intra-year declines yet the stock market (S&P500) has continued to go up in the long term.
I have been asked repeatedly lately, “Why is the stock market continuing to go up?”
My answer is always the same: “Earnings growth.” As you all know, I have always said that is what fuels the stock market in the long term.
I came across this chart and found it funny. I wanted to share it with you.
Check it out!
As the Federal Reserve Chairs’ got shorter, interest rates have fallen. President Trump’s new nominee is now taller than its last. Could interest rates then begin to rise? My guess is yes, but the Fed Chair’s height size is purely coincidental, right?