Still, some analysts point out that less-than-buoyant sentiment means that there is a lot of sideline money in cash and bonds that could potentially join the rally and push stocks higher. Also, U.S. stock valuations are about average based on historical price-to-earnings ratios. In other words, the market isn’t wildly overpriced or expensive. [Dividends, Inflation Put Dow Record in Context]
In fact, Richard Bernstein, chief executive of Richard Bernstein Advisors, makes the case that the current situation in stocks is reminiscent of the early 1980s, the opening phase of a secular bull market. “We have thought for some time that the current bull market might be one of the strongest of our careers, and could potentially rival the 1980s bull market,” Bernstein said in a MarketBeat post. He tracks three indicators that suggest a bear market is looming – a Fed that tightens too much, a market that’s too overvalued and an investor mindset that’s too euphoric. “None of those three signs are evident today,” he said in the MarketBeat report.
The Dow’s new nominal high is largely a psychological milestone “but it’s one that might convince investors the economy is actually recovering from the massacre of 2008-09,” reports Teresa Dixon Murray for the Plain Dealer.
“Psychologically, this is a good thing,” said Sanjay Bhargava, president of JK Investment Group, in the article. “What’s happening is that a lot of clients are seeing their portfolios come back to where they were in 2007. People are finally tippy-toeing back in.”
However, he cautions that investors who want to get back into the market may have already missed the bulk of the rally from the 2009 low. “For people who have been on the sidelines, I don’t know whether I would invest a lot now at these prices,” Bhargava said in the story.
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY.