Over the past several months, most of the available economic data has been positive, supporting the theme that the overall health of not just the U.S., but also the world, continues to improve. The market has responded positively, reaching historic highs and extending the current bull market. Concurrent with this, the news media has increased its speculation on the timing of the next correction (commonly defined as a decline in the S&P 500-Stock Index of at least 10%). We have no doubt that such an event will occur at some point, because we’ve had a lot of them (57!) since 1946 (S&P statistics). However, since during that time the S&P Index has gone from about 15 to 2,450, we suggest there are more important things for clients to focus on.
We also think it is interesting to consider whether we may be near a market top based on investor euphoria. Two interesting data points suggest this may not be the case. First, according to Gallup’s 2017 annual Economy and Personal Finance survey, only 54% of U.S. adults own equities. This is only slightly higher than the low point of 52% in 2013 and 2016. Second, according to Thomson Reuters and Credit Suisse, from 2009 until now, U.S. households have been net sellers of equities. So, here we are in the 9th year of the bull market, and only about half of all Americans have benefited from the market’s increase of roughly 2.5 times (excluding dividends). Moreover, many people remain uncomfortable with the idea of equity ownership and continue to avoid, or exit, the market.
History has shown that all market declines (as measured by the S&P 500-Stock Index) have been temporary; given enough time and patience, markets have rewarded investors with positive real rates of return. We will continue to help create and maintain a goal-focused, planning-driven roadmap for you and your families.