Higher and Higher….. Forever and Ever?
With the market making new highs practically on a daily basis, the question begs: Is it going to keep going higher and higher…. forever and ever?
If you need help answering that, let me help you. The answer is no… more likely HELL NO! In fact, the biggest question I get is, how can this market keep going higher and when is the next shoe going to drop?
Most people just don’t think the rise is warranted.
So, let me explain why stocks keep going higher and higher.
First off, corporate earnings are very strong. That is the #1 driver of stock prices. The years of fiscal stimulus with the Quantitative Easing programs are paying off. The experiment worked! The economy survived, and corporate America is as strong as ever.
The second thing I like here is that there is no recession in sight, either in the US or globally. In fact, the opposite is true. We have what is being billed as a “Global synchronized economy.” For the most part, the entire developed world is growing at the same time; this doesn’t happen very often.
The third shining light is the Federal Reserve is raising interest rates, but it is not generating inflation. You can actually make more money, and the cost of goods and services are not rising. This won’t last forever, but I’ll take it when I can get it.
The fourth thing is not very obvious, this is credit flows from banks. Banks continue to lend freely with no signs of letting up. This is a big one. Often times the beginning of a recession starts with banks curtailing lending. That is not happening here as lending continues to be strong.
So, there you have it in a nutshell on why the stock market keeps going higher. Will it continue forever? Of course not!
However, times are good – but they are not easy. Even though that I am optimistic right now and things look good, but they can change quickly. We must all remember that even trees don’t grow to the sky! This market has a lot of risk to it. Of course, it’s not going to be a straight shot higher. There will be a lot of potholes along the way.
If you are in your 20’s and 30’s, you can buy it and forget it. If you are retired, or in that retirement red-zone, a much more comprehensive retirement master plan is needed and it is time to graduate to a retirement advisor. They “should” understand how to prepare you for the different phases of life as you move from an accumulation investor to the preservation and distribution phase, and how to invest your hard-earned money to get the best returns with the least risk possible.
Feel free to contact me with any comments or questions.