August 2017 Stock Market Update

On Saturday, July 30th, I took my granddaughter to see the Emoji movie for her birthday. An Emoji is one of those little smiley faces people sometimes put at the end of their sentences. People use them to convey an emotion they want their recipient to feel. The hero of this movie was the “Meh” Emoji, which is supposed to convey a “okay, whatever” nonchalant type emotion. Well, July is usually a “meh” month in the stock market. Not much happens, either up or down, during July of most years.

Well, this July was different. The Dow was up 2.53%, the S&P500 was up 1.94%, the NASDAQ was up a whopping 3.39%, and the Russell 2000 (small company stocks) was up .71%. Overall, it was a great month for the stock market.

How much politics are contributing to the movement of the market is not clear. Historically, the stock market has mostly ignored politics. George W. Bush was a great friend of business and the stock market, yet we experienced one of the worst crashes in stock market history at the end of his administration. Barak Obama was widely seen as hostile to a free market and the economy came back slower under his administration than any in history. But the market soared during his tenure. So it may not be a bad idea to ignore current politics when considering how to invest long-term assets.

I do know that the Shiller P/E Ratio has inched its way above 30 for the first time since the crash of 2000. That doesn’t bode well for the future. According to the research firm Mebane Faber, when market valuations are this high, the next ten years are likely to yield a negative return. That is why we use active management principles to manage our clients’ assets. We know that insurance company accounts that offer an interest rate based on the movement of a stock index will most likely relegate that account to poor returns, so we remain committed to actively managing our accounts so that our clients will have what we believe to be the best opportunity for success.

By the way, Meh was able to save the day in the movie because he kept the teenage boy from deleting all the emojis that lived in his phone. Meh was recognized as the hero and everyone lived happily everafter. Sorry if you were planning to see it and I ruined it for you