S&P 500 at 2000
The S&P 500 closed yesterday for the first time above 2,000. That's a 200% increase from it's lowest print back in March of 2009 and is roughly 50% higher than its price on June 19th, 2012 when I noted the following:
"NEVER IN MY INVESTMENT CAREER {now spanning over a quarter of a century} HAVE I SEEN STOCK VALUATIONS THIS CHEAP BASED ON HISTORIC PE LEVELS AND ABSENT A RECESSION OR A SIGNIFICANT ECONOMIC CONTRACTION!!!! Either we are going to have an event that provides a significant hit to growth or stocks are presenting a buying opportunity of a generation for longer term investors,"
Investors today likely forget what things were like back then. Then as now economic growth had been tepid and we were gearing up for a bruising Presidential election that fall. Stocks had recently corrected about 6%. At roughly 1,335 on the S&P 500, equities had basically traded in place for a the past 17 months. There were many positives around if one looked under the hood of the world economic engine but the bad news seemed to have crowded all of that out. We looked out at the world and saw that different economic potential. We felt investors we discounting all that bad news. We thought there was great economic opportunity in equities. We are not saying that we made a market call or that we knew stocks were going to go higher back then. What we did was make a probabilistic assessment based on our investment pillars of market sentiment, fundamentals, valuation and money flow analysis. {See here} We thought stocks were better to buy. While there have been times since then that we have become in the short term a bit more defensive, we have not wavered from our longer term positive view of the economy or equities at any time since we made that announcement. You can go back and search the history of this blog and you will find many posts that verify what I just said.
At S&P 2000 you would think there would much more fanfare from the main stream press about stocks. Instead as Josh Brown over at the "Reformed Broker" noted on Monday when the S&P traded above 2000 for the first time, "The public will be largely unaware of this milestone, one in a series during the course of the current bull market that have eluded the notice of Main Street".
Why this has occurred, why the investing public has been so reluctant or unable to embrace this bull market is a subject for another time. Yet all the data shows this to have been the case. From the 3 Trillion dollars sitting in money market funds earning practically nothing to the billions that have poured into fixed income mutual funds and ETFs in the past few years, investors have shown a striking preference for assets that do not have perceived equity exposure. Last year's 20% plus percent return for most equity indices and a good start to 2014 have finally started to see a reverse of this money flow, but it is still a trickle rather than a torrent. Unlike the late 90's when stocks regularly set new highs, I am rarely asked in social situations my views on the markets.
In bull markets stocks "climb climb a wall of worry" is one of those old Wall Street adages you learn early on in your career. We all could list 15-20 things that are wrong with the world right now and I'll bet the average person couldn't list five things that are economically significant but have the potential to let the bull market in equities continue for the next few years. That is perhaps the most positive development longer term in my mind. Generals and investors fight the last war. To this generation the last war was the lost years of 2000-2009. Everybody has their antenna to the ground trying to find the next bubble or mania. Almost nobody acknowledges that period had a few unique attributes {high valuations, exogenous events, poor policy decisions etc.} that may not be repeated for many many years.
S&P 2,000 is just a number. It is a valuation marker and ultimately translates into a dollar figure in some form in equity accounts. 2,000 will be followed by other numbers in the years to come. Hopefully those numbers will in general move higher. It's our job to interpret the data, look for investments with the potential for superior returns and become defensive when we need to do so. Yet at the end of the day our main job is to try to keep our investors in the game. Doing so, even in bad times, keeps us positioned for when things get better.
*Long ETFs related to the S&P 500 in client and personal accounts although positions can change at any time.
At S&P 2000 you would think there would much more fanfare from the main stream press about stocks. Instead as Josh Brown over at the "Reformed Broker" noted on Monday when the S&P traded above 2000 for the first time, "The public will be largely unaware of this milestone, one in a series during the course of the current bull market that have eluded the notice of Main Street".
Why this has occurred, why the investing public has been so reluctant or unable to embrace this bull market is a subject for another time. Yet all the data shows this to have been the case. From the 3 Trillion dollars sitting in money market funds earning practically nothing to the billions that have poured into fixed income mutual funds and ETFs in the past few years, investors have shown a striking preference for assets that do not have perceived equity exposure. Last year's 20% plus percent return for most equity indices and a good start to 2014 have finally started to see a reverse of this money flow, but it is still a trickle rather than a torrent. Unlike the late 90's when stocks regularly set new highs, I am rarely asked in social situations my views on the markets.
In bull markets stocks "climb climb a wall of worry" is one of those old Wall Street adages you learn early on in your career. We all could list 15-20 things that are wrong with the world right now and I'll bet the average person couldn't list five things that are economically significant but have the potential to let the bull market in equities continue for the next few years. That is perhaps the most positive development longer term in my mind. Generals and investors fight the last war. To this generation the last war was the lost years of 2000-2009. Everybody has their antenna to the ground trying to find the next bubble or mania. Almost nobody acknowledges that period had a few unique attributes {high valuations, exogenous events, poor policy decisions etc.} that may not be repeated for many many years.
S&P 2,000 is just a number. It is a valuation marker and ultimately translates into a dollar figure in some form in equity accounts. 2,000 will be followed by other numbers in the years to come. Hopefully those numbers will in general move higher. It's our job to interpret the data, look for investments with the potential for superior returns and become defensive when we need to do so. Yet at the end of the day our main job is to try to keep our investors in the game. Doing so, even in bad times, keeps us positioned for when things get better.
*Long ETFs related to the S&P 500 in client and personal accounts although positions can change at any time.
posted by CR English at 9:53 AM
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