As Memorial Weekend drew to a close, the three key stock market benchmarks in the United States were headed upward – the first time this year that they’ve all been positive at the same time – and the S&P 500 closed above 1,900 for a new record. The bull market that began back in 2009 continues – a fact that perplexes pundits who recently predicted a variety of ills, including higher inflation and a slowdown in the housing sector. While good market news has failed to generate euphoric responses, history suggests that a more measured reaction is in the best interest of investors large and small.
Many Wall Street observers believe the bull market still has some legs left, and a few bullish analysts note that lack of excitement is a positive development because wild exuberance is often followed by sharp declines. Others note that big gains are probably a thing of the past and are content to see a steady upward trend.
The doomsayers have zoomed in on the housing market despite the fact that April’s statistics showed the first increase in existing-home sales this year. Many commentators acknowledge that the recovery in housing is slow – but that it is steadily moving in the right direction. With the job outlook improving and unemployment claims at seven-year lows, investment gurus believe that housing is on a solid track. Credit has been extremely tight for home buyers, but mortgage lending is becoming easier and home prices remain affordable for first-time buyers.
The first months of the year did not provide market analysts with the decisive numbers they had anticipated, largely due to severe weather in the winter months and sluggish earning reports. Solid but moderate economic news failed to dazzle, and some feared the market’s uptick was fueled with hope rather than solid numbers. Overall, the market appears caught between those who see steady moderate growth as a positive and those who want more evidence of greater economic gains.
On the international scene, we’ve seen our share of merchants of doom as well, with some respected economists in U.S. private and public sectors delivering grim prognoses.
The situation is Europe has taken a turn for the better. Bearish analysts looked at the debt crises in Spain, Greece, and Italy and foresaw impending disaster in the Euro-zone that would hobble economic recovery in the United States. However, predictions of the collapse of the Euro were expunged when the European Central Bank vowed to preserve the currency at all costs – and did just that.
Investors who’ve stayed in the market since early 2009 have seen good returns over the past five years. Recent long-term results have offered proof that the slow and steady investment approach prevails over sizzle and flash.
The above commentary is general in nature and not designed to replace the advice of professional tax and investment counselors.