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.
Market manipulation is a common practice. Knowing how to spot it and avoid its pitfalls is an integral part of successful investing. We also examine today's unprecedented monetary liquidity in the context of the stock market.
The S&P 500 rose by 0.41% and the Dow was higher by 0.32% today. It was another slow steady grind higher in the markets as rotation into more cyclically oriented names continued.
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.
Back in mid-March I made the latest of my somewhat rare specific, near-term market predictions, in this case that a US stock market correction or even a crash was imminent. Now some six weeks and a further 5% rally later, I revisit this view.
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.
During the first week of May every year, the maxim, “Sell in May and Go Away,” gets taken out, dusted off and powered up as a reason to sell stocks.
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.
Overnight markets were higher, led by Japan, which gained 3.5%. The Reserve Bank of Australia joined the worldwide easy money party last night, as it dropped rates by 25 basis points.
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