The Nasdaq is reaching all-time highs, while the Dow is ending an eight-day losing streak for the first time since 2018. If the Dow declines again today (as it currently appears), it will mark the first nine-day losing streak since 1978. The S&P 500 has been relatively stable since its record high close two weeks ago. However, it's still up a significant 28% this year, and its charts suggest potential for further growth.
We've also seen 11 consecutive days with more declining stocks than advancing stocks in the S&P 500, the longest stretch on record. There's more! The market capitalization of U.S. companies with an enterprise value trading at more than ten times adjusted profits, or EBITDA, according to Goldman Sachs, has now surpassed pre-correction levels. However, mega-cap tech stocks like Google are trading at just 22 times forward earnings, which isn't considered overly expensive. What does this all mean? Is the market 'broken'? Is it in a tech or AI bubble? The current exuberance, particularly post-election, suggests a potential pullback. With a long-term investment horizon of two or more years, would I rotate out of the S&P 500? No. I desire exposure to the traditional S&P 500. Does it mean more volatility? Certainly. However, the flipside is the potential for higher returns in the long run. America is currently the envy of the world, especially for its tech outperformers. The S&P 500 alone now accounts for more than 50% of global stock market capitalization. I understand that many people want to 'fade' this trend and suggest it's time to rebalance into international stocks
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