6 Reasons Stocks Can Go Higher From Here
We’ve heard a lot of arguments from the financial media lately about why American stocks are due for a big price drop. They’ve been called overbought, overvalued and overdue for a big pullback. We would like to make a bullish case for further price gains:
S&P 500 companies have currently 30% of their assets in cash. This is the highest percentage level in 17 years. Corporate spending should fuel economic growth and earnings.
American Households are financially thriving: The average household net worth is $95,000. Household debt payments are only 10% of disposable income. The average Fico score is 743. These figures are the strongest we’ve seen in 40 years. This is good for our economy and, by association, the markets.
Retail investors pulled 62 Billion from US stocks between 2015 and 2016: We’re a long way from the typical investor euphoria that precedes most bubbles.
The average 6 Month CD yields 3/10ths of 1%: That’s 3$ on every $1,000 invested. Sitting on cash is not a viable long-term growth strategy at this point.
Investors have 2.65 Trillion in money market funds: That’s a lot of potential buying power if it moves back into the market.
The Forward-Price-to-Earnings ratio is the most common stock valuation measure out there. Today, the S&P 500 sits at a forward P/E of 17.5x… only 3% higher than the 20-year historical average.
Stock ownership is a great way to financially benefit from human innovation and global growth. Stocks are usually more volatile than bonds and each individual company has their own risks. However, looking back at the history of the stock market, owning stocks has provided a far greater long-term return over bonds or cash.[1]
[1] Source: Dalbar Inc. March 31, 2017 Source: J.P. Morgan Asset Management, ICI.org. 20-year annualized valuations and returns are based on the S&P 500 Total Return Index. Past performance is not indicative of future returns. An individual cannot invest directly in an index. Data as of March 31, 2017.