Is The Stock Market Too High?

I’m not sure that anyone knows the answer to this.  Every day, all day, CNBC features a wide range of market experts and pundits who, invariably, take positions that are 180 degrees divergent on each side of every issue.  At the end of the day, you will have heard from those who believe that the market is too high, too low, or just right.  You will also have heard the same range of views on individual stocks.

None of this is much help.  Investors need to be comfortable with their decisions.

If you’re uncomfortable, revisit your long -term goals and strategy, check with your advisor(s) and make appropriate adjustments.  If you find that a strong market has increased the equity portion of your portfolio beyond your comfort range, cut back.   Yes, interest rates are low, by historical standards, but is the difference between 2% and 4% worth the sleepless nights?  Remember, the fixed income portion of your portfolio is more about preservation of capital than returns.

Markets fluctuate.  Pull backs in a strong market are normal.  Periodic sharp declines and/or increases in the realm of investing are rarely novel news.

Investors should continue to monitor their exposure to equities, and make adjustments that are consistent with their portfolio objectives.  Stay in your comfort zone to avoid taking potentially inadvisable actions during periods of stress.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA