2019 facts:
S&P 500 revenue growth was 4.2%*
S&P 500 earnings growth was a mere 0.6%*
S&P 500 Price index was up 30.4%
What gives? In my opinion, the current bull market in stocks has been built on the shaky combination of low interest rates, increased debt, corporate share buybacks, a firehose of liquidity from the Federal Reserve, and price-insensitive buyers of index funds. A week ago, markets were still near their record highs. Now, with the appearance of the COVID-19 virus, things appear to be changing.
Last week’s market action reminded me of my favorite passage from Adam Smith’s classic book, Supermoney (1972): “We are at a wonderful ball where the champagne sparkles in every glass and soft laughter falls upon the summer air. We know at some moment the black horsemen will come shattering through the terrace doors wreaking vengeance and scattering the survivors. Those who leave early are saved, but the ball is so splendid no one wants to leave while there is still time. So … everybody keeps asking ‘what time is it’? But none of the clocks have hands.”
Please call or email me if you have any questions. In the meantime, Spring arrives in a few weeks, and the days are getting longer and warmer. Happy March.
If you enjoy my monthly missives, please share them with a friend. If you don’t, please tell me. My office hours are typically 7:30 AM - 4:00 PM. Pick up the phone and let me know what’s on your mind. In the meantime, I greatly appreciate your trust and friendship, and thank you for the opportunity to be of service.
Copyright © 2020 - Any opinions are those of James Aldendifer and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The above situation is a hypothetical example for illustration purpose only and does not represent an actual investment. Expressions of opinion as of this date are subject to change without notice. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.
*FACTSET Earnings Insight, February 21, 2020
