Investment Matters

US market reaches record high

US markets reaches record high

Defying the Brexit doomsters, the S&P500 (the best indicator of US stocks markets) reached new highs on Monday.  And kept on going.


After 287 trading days the US market reached a new high on Monday

Statisticians will tell you that those 287 trading days between all-time highs (21-May-15 to 11-Jul-16) was the longest ever without a bear market (a fall of 20% of more).

The previous record was in 1995, after which the US market boomed for 200 more trading days!

Are we about to see a repeat?

Perhaps not:

In 1995 we were on the brink of a revolutionary technological change to the economy: the internet.  I cannot see the next wheel, railroad, automobile or internet just around the corner.

US company profit growth is negative today, compared to better than 25% in 1995.

The market is much more expensive today than in 1995.  Then, the trailing market P/E was 15.  Today, that figure is 24.

Australian market also bounces, but is still well below its peak.

As you can see, the Australian market is limply following the US.  But remains well down from its most recent peak of Apr-15.


Australian market: not so strong

But it's worse than it looks.  Whereas this week the US market reached an all time high, the Australian market is still 18.8% below its October 2007 peak.

What now?

We are cautious.  The Australian market does not have a momentum of its own.  It is just following overseas markets.  

It is also relatively expensive.

We are keeping our powder dry.