Is your portfolio looking great these days? So it should. Wall Street has just enjoyed its best nine-month performance to start a year since 1997.It’s exhilarating because U.S. stocks surged after October, 1997, and climbed nearly 50 per cent over the next three years. If history repeats itself – or even if it just rhymes – similar gains could happen again.
In fact, it’s almost as impressive as what prevailed back in 1997. Back then, the economy was booming ahead at a breakneck 3.9-per-cent clip, unemployment was unusually low and inflation was barely above 2 per cent. However, the late 1990s demonstrate that buying into the latter stages of a tech boom can be a dangerous proposition for buy-and-hold investors.
At the moment, many observers see no reason to panic. Citigroup analysts, for instance, agree that the S&P 500 is fully valued by traditional valuation metrics, but argue it is not overvalued once you factor in falling interest rates and strong earnings growth. They see potential in growth stocks and energy stocks.
Maybe so. Risk-loving investors can bet on this volatile scenario unfolding according to plan. Others, though, may not feel quite so confident about their ability to get out in time.