The current economic expansion is now 117 months old. Looking at data that goes back to 1854, this is just shy of the record 120-month expansion that occurred from 1991 to 2001. It seems likely we’ll soon exceed the prior record, but how long can the economy continue to grow, and how long can the stock market continue its associated bull run?
Prince, or the artist formerly known as Prince, or whatever his name ultimately was, made headlines throughout his life for his talent and eccentricities. However, the headlines after his death in 2016 revolved around the fact that he died with an estimated $200 million estate and no documents in place to guide its disposition.
The diversification of an investment portfolio has been described as the one “free lunch” in the investment world. That is because holding a portfo¬lio of assets with unique risk and return characteristics can result in higher long-term returns and a lower risk profile.
October has come and gone, which is likely a relief for investors. October gets a bad rap when it comes to the stock market, and perhaps deservedly so: It was October of 1929 when the slide into the Great Depression began in earnest with a 20 percent dip in the stock market. It was also October, in 1987, when Black Monday resulted in the stock market falling over 20 percent in a single day. October of 2008 saw stocks decline 17 percent.
The stock market achieved an all-time high in late January, but then saw a subsequent drop of more than 10 percent. Since then, it has vacillated wildly, reacting to strong economic news, yet also showing signs of concern. The Fed has been raising short-term interest rates, and volatility has returned in earnest. This has set up a “Tale of Two Markets” scenario, which is making investors question if they should get out of stocks altogether.
Small-cap value stocks have been uniquely poor performers recently. They posted strong returns in 2016, but otherwise, each of the past seven years small-cap value stocks have either significantly lagged or just barely beaten large-cap growth stocks.
Stock and bond market investors watch with trepidation as the Federal Reserve Board determines how much to raise interest rates this year. The Fed has already taken short-term interest rates from roughly zero percent to a target of 1.50 percent to 1.75 percent, and promises further hikes throughout 2018.
Perhaps no financial product is more controversial than annuities. At best, an annuity is an insurance offering that provides a guaranteed stream of income that you cannot outlive. At worst, it is a high-cost way to earn subpar investment returns.
With both stock and bond market valuations at lofty levels, many investors are starting to wonder if they will be able to continue to earn the types of returns they have enjoyed over the past nine years. Continued gains in the stock market would push valuations to potentially dangerous levels, and bond yields aren’t that far north of zero currently.
As of this writing, cybercurrency Bitcoin has appreciated in value in excess of 1,500 percent so far this year. That makes it one of the best performing investments ever, even when considering tulip bulbs in 1636, stock in the South Sea Company in 1720, and internet stocks in the late 1990s. Most of the academic studies written on financial markets start with a few basic premises: investors are rational, they want to maximize returns, and they want to minimize risk. Is it possible that the move in Bitcoin is a rational response to new data that has emerged over the course of the past year? Probably not. Bitcoin remains largely the same from a structural standpoint today as it did a year ago.