Commentary RSS

July 2017 Quarterly

Some Perspective…

Investors in stocks have had attractive returns in the first half of 2017 and since the market bottom in March of 2009, with many widely followed indices making record highs in the last six months. Historically our eight-year bull market is long in the tooth, worrying investors. The above chart gives us a perspective on where we are today compared to valuations at previous market peaks and over the last few years. Note that most of the valuation metrics have been “orderly” inching higher since the market bottom in 2009 and that most of today’s valuation numbers are lower than they were in March of 2000. We also note that ten-year Treasury bond yields, held down by central bank policies and stubbornly low inflation, are much lower than they were at previous market peaks. Highly leveraged banks shouldered part of the blame for the Great Recession, illustrated by Lehman’s leverage ratios before going bankrupt in September of 2008. Banks are about 1/3 as leveraged as they were in 2007 and were given a green light last week by their regulators. So, “orderly” higher, but not historically extreme valuation ratios, low interest rates, continued stimulus from central banks and less leverage in the volatile banking sector does not add up to an imminent collapse of stock prices.

Read the full July 2017 Quarterly

Comments are closed.