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Is The Stock Market a Dangerous Investment At The Moment?

Posted on Posted in Traditional Investments

The S&P 500 has continued its move upward, reaching new record highs and entering uncharted territory. In late February 2017, the S&P 500 had gone nearly 100 straight sessions without a 1% decline. When we consider the fact that Corporate America didn’t exactly impress us with their performance during the fourth quarter (2016-2017), this streak should be seen as troubling to investors.

It’s getting bubbly out there in stock market land. – Brian Sozzi, The Street

The gap between commodities prices and the S&P 500 has increased. According to market analysts, commodities prices and the S&P 500 should move more in partnership. This would confirm that businesses are in fact seeing the demand that warrants more investments in raw materials. The chart below suggests that stock prices have move away from any semblance of reasonable future demand by businesses. That is alarming.

s and p 500 commodities prices

Any company, even the best ones in the world, can have issues and see their stock’s value decline dramatically. The inability of investors to at least acknowledge the persistent struggles among companies, not to mention the ongoing uncertainty in Washington, is disturbing.

As a word of caution, be certain to check the valuations of the stocks you own (or want to buy) against a reasonable set of future earnings outcomes. You may be surprised by how far things have gotten “out of whack.” It may be worthwhile to lighten your stock holdings to protect yourself from the risks of the stock market.

Although the stock market has historically performed well over the long term, there’ is no guarantee that you will make money on stocks. Certainly there are a number of things to help you assess a stock’s value, but no one can predict exactly how a stock will perform; especially during times of economic and political uncertainty.