All-time highs! That’s right, the S&P 500 index hit an all-time high Thursday, as did a bunch of other capitalization-weighted indexes of the U.S. stock market. The yawping and nattering we heard from so many gurus (about the government shutdown and the default threat) turned out to be so much irrelevant nonsense.
The scaremongers should be ashamed of themselves, but of course they won’t be. Their livelihoods depend on creating noise—and diverting investors from the real issues at hand.
So, now that the debt ceiling has been raised, and the government employees are back at work, and the headline stock indexes are scaling new peaks, what are the real issues investors need to face?
Certainly not this or that economic statistic, or this or that earnings report. Altogether too many folks get consumed by these minutiae and miss the forest for the trees.
The central issue for investors is that stocks are expensive by historical standards and the economy is growing very slowly.
I could prove both of these points with a mound of statistics, but I won’t. It’s unnecessary. Anybody paying even the vaguest attention to the wider world knows what I’m talking about.
What matters most is what you do with this information. If stocks are pricey and the economy is far from robust, you’re dealing with a high-risk investment climate. That doesn’t mean you can’t make money. It doesn’t mean you should hide under a bed. But you had better be extra careful about when and how you invest.
You should do most of your buying when (as in late August and again last week) the market is temporarily down. After a brisk rally such as we’ve had since October 8, your thoughts should turn to selling your holdings that have run up more than buying.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.