{"id":8822,"date":"2020-08-31T18:17:21","date_gmt":"2020-08-31T18:17:21","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=8822"},"modified":"2022-02-26T13:06:31","modified_gmt":"2022-02-26T13:06:31","slug":"sp-500-hits-new-highs-should-you-be-worried","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/sp-500-hits-new-highs-should-you-be-worried\/","title":{"rendered":"S&#038;P 500 Hits New Highs. Should You Be Worried?"},"content":{"rendered":"\n<p>In the second quarter, S&amp;P 500 corporate earnings were\ndown over -30% on approximately -10% lower revenues.<sup>1<\/sup> Daily\nconfirmed cases of Covid-19 in the United States continue at a pace in-line\nwith early days of the outbreak, and the Bureau of Labor Statistics\u2019 July\nunemployment report showed 16+ million unemployed Americans with an\nunemployment rate of 10.2%.<sup>2<\/sup> <\/p>\n\n\n\n<p>Meanwhile, the S&amp;P Index is trading at all-time highs. <\/p>\n\n\n\n<p><strong>S&amp;P 500 Since\n2018: Volatile, But Still at All-Time Highs<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/image-1-of-1-3-1024x395.png\" alt=\"\" class=\"wp-image-8823\"\/><figcaption> <strong><em>Source: Federal Reserve Bank of St. Louis<sup>3<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p>I have written before about this seeming disconnect between\nwhat the stock market is doing and what we\u2019re seeing in the U.S. economy and in\nthe news. In my view, the stock market is arguably pricing-in what the economy\nwill look like a year from now, and what the market sees is significant pent-up\ndemand, a fading pandemic-induced economic impact, and a wall of liquidity\ncoursing its way through capital markets. <\/p>\n\n\n\n<p>The question I want to address is this column, however, is\nwhether investors should be concerned about the U.S. stock market hitting\nall-time highs with the economy still bruised and slowly recovering. Does the\nmarket reaching all-time highs mean a crash or major correction is coming? <\/p>\n\n\n\n<p>_____________________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_8_31&amp;content=stock_market_outlook_report\">What Could These All-Time Highs Mean for the Future of the Market?<\/a><\/strong><\/p>\n\n\n\n<p>Could all-time highs mean a\ncorrection or crash is on the horizon? It is impossible to know the end-result\nwith complete certainty. But looking at hard data and economic fundamentals can\nhelp you understand better the current market environment. <\/p>\n\n\n\n<p>To help you get a\ndeeper look into this data, I am offering all readers our just-released Stock\nMarket Outlook report. This report contains some of our key forecasts to\nconsider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>What\u2019s \u2018Fair Value\u2019 on the S&amp;P500? <\/em><\/li><li><em>Setting U.S. returns expectations for the remainder of\n     2020<\/em><\/li><li><em>What should you think about COVID19 era jobs data?<\/em><\/li><li><em>An update on U.S. fiscal stimulus <\/em><\/li><li><em>Zacks Rank S&amp;P 500 sector picks<\/em><\/li><li><em>Status of global energy markets<\/em><\/li><li><em>And much more<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!\u00a0<br> <br><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_8_31&amp;content=stock_market_outlook_report\">IT&#8217;S FREE. Download the Just-Released September 2020 Stock Market Outlook<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_8_31&amp;content=stock_market_outlook_report\">3<\/a><\/sup><\/strong><\/p>\n\n\n\n<p>_____________________________________________________________________________<\/p>\n\n\n\n<p>No one truly knows the answer to that question. We know that\nmarket corrections and bear markets are normal and common, but we do not know\nwhen they will arrive or how long they will last. If anyone tells you \u2018with\ncertainty\u2019 when market downside is coming and how long it will last, my advice\nis to run the other way. <\/p>\n\n\n\n<p>In thinking about where the markets and economy could go in\nthe next year and beyond, I find it useful to break it down by key category: <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Economics\n\u2013 <\/strong>The pandemic-induced recession was steep and ugly. But I think there is a\ngood argument that the worst of the crisis is now behind us. Manufacturing and\nservices activity have rebounded firmly off lows, the housing market has seen\nvery solid activity, and spending has outpaced expectations. In other words,\nwith the second quarter as a starting point, I expect the economy to grow and\nfor the employment situation to gradually improve. <\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Earnings \u2013\n<\/strong>Second quarter earnings were bad, plain and simple. But at the same time, I\nwould argue that earnings were not <em>as bad\nas expected, <\/em>and stocks love positive surprises. Indeed, 80.0% of S&amp;P\n500 companies beat earnings-per-share estimates and 62.9% beat revenue\nestimates in Q2, both firmly above historical averages for beat percentages.<sup>5<\/sup>\nWill earnings continue to improve going forward? I think so.<\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Interest\nRates \u2013 <\/strong>Overnight rates in most developed countries are near historic lows,\nmeaning that borrowing costs and financing costs are highly attractive for\nbusinesses and individuals that can obtain loans. Central banks around the\nworld also appear poised to keep interest rates low for years to come, which makes\nequities attractive by comparison, in my view.&nbsp;\n<\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Inflation\n\u2013 <\/strong>The\namount of global stimulus is absolutely massive, and by comparison, it is many\ntimes bigger than the stimulus deployed in the late stages of the 2008\nFinancial Crisis in 2008-09. It is a bit crazy to fathom, but the total global\nfiscal and monetary stimulus being deployed amounts to approximately <em>28% of world GDP<\/em>.<sup>6<\/sup> This \u2018wall\nof liquidity\u2019 makes inflation seem more likely in the coming years, and will be\na factor to watch. &nbsp;<\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Sentiment\n\u2013 <\/strong>I think consumer and investor sentiment is improving in the wake of the\npandemic but may sour as the election nears. The mixed bag on sentiment may be\nok for stocks, ultimately \u2013 not too hot, not too cold. <\/li><\/ul>\n\n\n\n<p><strong>Bottom Line for\nInvestors <\/strong><\/p>\n\n\n\n<p>The nature of bull markets is that we can expect the stock\nmarket to reach new highs over time. It is what history tells us to expect\nevery time. <\/p>\n\n\n\n<p>As such, I would caution against seeing an all-time high as\na reason to go defensive or to take profits off the table. For one, selling\ninto the market\u2019s strength is a form of market timing, which I do not advocate.\nBut more importantly, when setting a long-term investment strategy, it is\nimportant to consider how the economy may grow or contract in the next six,\ntwelve, even 18 months. In my view, the economy one year from now will be in\nbetter shape than it is today, and owning stocks means participating in the\ngrowth that happens between now and then. <\/p>\n\n\n\n<p>No one knows with certainty what is in store for the future of the market. But, paying attention to key data can help you make educated investment decisions. To help you do this, I am offering all readers our<strong> <a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2020_8_31&amp;content=stock_market_outlook_report\">Just-Released September 2020 Stock Market Outlook Report.\u00a0<\/a><\/strong><br><\/p>\n\n\n\n<p>This report looks at the key economic indicators\nand highlights several factors that are producing 2020 optimism right now and\ncontains some of our key forecasts to consider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>What\u2019s \u2018Fair Value\u2019 on the S&amp;P500? <\/em><\/li><li><em>Setting U.S. returns expectations for the remainder of\n     2020<\/em><\/li><li><em>What should you think about COVID19 era jobs data?<\/em><\/li><li><em>An update on U.S. fiscal stimulus <\/em><\/li><li><em>Zacks Rank S&amp;P 500 sector picks<\/em><\/li><li><em>Status of global energy markets<\/em><\/li><li><em>And much more<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<sup>7<\/sup><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Amidst high unemployment and depressed earnings, the market is skyrocketing. Is that a problem?<\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-8822","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8822","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8822"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8822\/revisions"}],"predecessor-version":[{"id":10553,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8822\/revisions\/10553"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8822"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8822"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8822"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}