How to React Wisely to New Market Milestones

Stocks have done well in recent years, and the result is stock market indices at record levels. May 22nd was the 10th time so far in 2015 that the S&P 500 index of large US stocks has closed the trading day at its all-time high. How should you react to this spate of new milestones?

Topics: Stock Market

Should You Be Afraid of a Stock Market Crash?

US stocks have been on a tear over the past 6 years, with the S&P 500 index of large US stocks returning over 200% since its nadir in March 2009. Such a lengthy bull market can lead to concern about when it will inevitably end; after all, stock markets tend not to rise forever. But if such fear leads you to hoard cash rather than invest it, you’re likely making a mistake, particularly if you have a long time horizon for your portfolio.

Topics: Blog Stock Market Risk

What the Job Boom Means for Stocks

On Friday the Bureau of Labor Statistics announced that the economy added 257,000 jobs in January and increased its estimate of last year’s job gains. The 3.1 million jobs that were added in 2014 according to the latest numbers were the most since the turn of the century, and 2015 seems to be off to a strong start as well. So what does this job market boom mean for your portfolio? The answer, perhaps surprisingly, is “probably not much.”

Topics: Blog Stock Market Economy Jobs

The Importance of International Diversification

With a seemingly constant drip of bad news from around the globe—military conflicts in Eastern Europe and the Middle East, the spread of Ebola, slowing economic growth in Western Europe and many emerging markets—it may feel that the US is the only safe place to invest your money. But not having enough exposure outside the US means not enough diversification, and that can actually mean higher risk and potentially lower returns over the long run.

Topics: Blog Stock Market International Valuation Diversification

Reacting to a Stock Market Decline

The last month has been a rough one for the stock market. The S&P 500 index of large US stocks has fallen by more than 7% in the last four weeks (as of the end of the day on October 16th), and many international stock markets have fared even worse. Such a sizable decline can be painful, especially since stocks in general have done so well since the end of the global financial crisis in 2009. But sticking to your long-term strategy, rather than panicking and trying to change things up in response, is (as usual) probably the right way to react.

Topics: Blog Stock Market Risk

Understanding the “Momentum Effect”

Often it’s safe to assume that what goes up must then come down. With investing, however, it’s not quite so simple. Studies have shown that stocks tend to have a “momentum effect,” meaning that stocks that have recently gone up are more likely to do well in the near future (and that stocks that have recently gone down are more likely to do poorly in the near future).

Topics: Blog Stock Market Momentum

The Effects of Innovation

Is more innovation good for stocks? Given the success of Apple after the release of new products such as the iPhone or surging stock price of electric car manufacturer Tesla Motors, it may seem obvious that new innovations lead to better investment returns. But for the stock market overall, or even an entire sector of the market, that’s not necessarily the case.

Topics: Blog Stock Market Facebook Innovation Apple Tesla

Are Stock Valuations Too High?

US stocks have continued to climb this year even after surging by more than 30% in 2013. Earlier this year we argued that US stocks appeared to be slightly overvalued, but other analysts argue that stocks are fairly valued. Which analysis is correct?

Topics: Blog Stock Market Valuation

Are More Share Buybacks a Good Sign?

Share buybacks—companies using cash to buy stock in their own company—are becoming a more common way for American corporations to spend their money. In the first quarter of 2014 share buybacks from the largest US companies increased by 50% relative to the first quarter of last year, according to analysts at FactSet. Is such an increase a good sign or a bad sign for investors? The answer (perhaps unsurprisingly) is “it depends”.

Topics: Blog Stock Market Dividends Buybacks

Q2 Recap: Stocks and Bonds Both Rise as Low Volatility Reigns

There were plenty of potential triggers that could have sent financial markets into a panic in the second quarter of the year: it was revealed that the economy contracted in the first quarter at an annualized rate of almost 3%, the Federal Reserve continued to scale back its monetary stimulus, and oil prices rose as Iraq was overrun by insurgents. But financial markets shrugged off these developments, and the quarter was characterized by low volatility (few large ups and downs in the markets).

Topics: Blog Stock Market Bonds Volatilty Markets