How Much Longer Can Markets Rise?

By Damon Gonzalez via

2017 was an investor’s dream. It was one of the least volatile years in stock market history and every asset class that I can think of went up. Unless an investor was using Bitcoin’s 1,318% return as their benchmark, most investors were happy.

2018 has been a more normal year with increased volatility and wider variations in returns among different asset classes. As I write, at the end of August, many people don’t remember that the S&P 500 went up 7.5% by January 25th of this year. After the extreme melt-up we saw over a 13% crash in only 10 days.

Since then there have been an endless stream of news stories about how bad the trade wars will become, political scandals, and warnings about how the US is in its second longest expansion in history.

I have had a couple of clients ask if we should now try to time the market since expansions can’t go on forever and why returns in 2018 aren’t as rosy as they were in 2017. Let me start with the later question.

On the next page is a chart of year to date returns of six State Street ETFs representing different asset classes.  The chart only tracks price and does not count dividends. Domestique Capital LLC uses State Steet ETFs in portfolios. The orange and the pink lines are US large and small companies, which are having a good year. The purple (bonds), light blue (foreign stocks), dark blue (Emerging Markets), and yellow lines (gold) are all negative year to date.  As someone once said, diversification means always having to say you are sorry.

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