I recently joined CNBC’s closing bell segment to discuss the state of the rally, and whether investors can have confidence buying the market even as the S&P 500 approaches 2000 and the Dow Jones Industrial Average nears 17,000.
In a nutshell, I think this rather Dickensian market will tell investors whatever they want to hear. If you want evidence of a crash, look at the stretched valuations for some stocks and the euphoria around overhyped startups like Uber. Couple this with a lack of substantial growth in the top and bottom line for major corporations, and there’s reason to be skeptical.
However, I think multiple expansion is a characteristic in any bull market as investors start to become optimistic about future growth prospects. And if you want to be a bull, then the fact that the Fed will remain accommodating and indexes continue to set new highs shows that there is a very real tailwind for investors right now — regardless of how things might change in 12 or 18 months.
If you’re looking for a good way to straddle these two conflicting views, I say consider enterprise tech stocks. Companies like Intel (INTC), Cisco (CSCO), Oracle (ORCL) and Microsoft (MSFT) all have reasonable P/E ratios on a historic basis and are cheaper than the broader market at this point. Furthermore, you can get a decent dividend yield and the prospect of an increase in distributions down the road thanks to stable operations and very sustainable payout ratios.
Check out my clip for more details.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at email@example.com or follow him on Twitter via@JeffReevesIP.