Topping Point?

The market is hitting record levels. Should we be worried?

Record levels on the S&P 500 remind people of October 2007 and August 2000. Folks get a gut-clenching sense of déjà vu that they’ve seen this movie before, and it isn’t a feel-good flic, it’s more like Halloween Part 3. They keep waiting for Jason to jump out from behind that tree in his hockey mask.

But this isn’t a movie, even if there seems to be a laugh track around every corner. The Dow and the S&P are now in record territory, earnings are growing, margins are stable, and the economy has been growing steadily for four years. The market leads corporate earnings which lead the economy. Just because a market is at a new high doesn’t mean a pullback is imminent.

Sure, there will be turbulence ahead—there always is, as industries and companies go in and out of favor. That’s part of the creative destruction of capitalism. But bull markets grow on skepticism. All that worry out there just helps the market get stronger.

Douglas R. Tengdin, CFA

Chief Investment Officer

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