This extraordinary stock market is driven by characteristics that defy conventional valuation techniques. I receive emails from people who tell me that the market is overextended, overvalued, and trading way above its 50- or 200-day moving average. If you look at the metrics, the market is all of those things.
As was highlighted in last week's article, the key theme since 2011 has been declining inflation and economic growth rates. Lower inflation and weak economic growth is not the environment that favors investments in commodities or commodity-sensitive currencies (CAD, AUD).
While the stance of monetary policy around the world has, on any conceivable measure, been extreme, by which I mean unprecedentedly accommodative, the question of whether such a policy is indeed sensible and rationale has not been asked much of late.
The stock market rally is continuing to push higher, taking the broader market indexes into record territory. This has put skeptics like myself on the defensive. But the reality is that we aren’t seeing all-around celebration in the market as used to the case in the past.
The S&P 500 climbed by 0.52% and the Dow rose by 0.58% to close above 15,000. Both indexes have now reached new record highs in nominal terms. Transports, media, industrials, and banks were leading sectors today and technology and homebuilders were laggards.