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We are experiencing a new peak in the rhetoric around trade, geo-politics, the economy and the business cycle. We have also seen increased market volatility. It is hard to know when to be concerned and when to tune out the noise. Having a consistent framework for viewing markets with a long-term perspective is a valuable tool to help avoid costly behavioral mistakes.
While there may be a heightened sense of fear in the headlines, there is no reason to sound the alarm.
Our Market View looks at economic, valuation, technical and behavioral indicators to gauge the overall health of the market. Manufacturing-and service-provider activity measures economic health, which is positive. Overall stock prices relative to future earnings measure valuation and are currently elevated, but not extreme. Technical measures of short and medium-term momentum along with market participation are reading positive. Finally, our unique behavioral measure of expected market returns, based on investor preferences, are in normal ranges.
This mixed overall picture is common and there is no cause for concern as long as the majority of indicators are in reasonable ranges. For the complete Market View click here.
For long-term investors, a consistent market view provides a solid foundation and calibration for reassurance that can avoid overreaction. While there is an ever-growing supply of things we could worry about, most of the time the markets and the economy are in relatively good shape and investors should stay on track with their long-term plans. So, enjoy the summer and take a break from worrying about the market.
