As we transition from summer to fall, multiple posts cover the perceived high prices in the US equity markets. Here are two of our favorites.
American Century – Navigating Risks Amid High Prices and High Hopes – While expectations that a Trump presidency will be pro-growth seem reasonable, the actual impact will not crystallize until policies move forward. These uncertain policy outcomes, coupled with higher interest rates, inflation and trade restrictions, could create headwinds.
WisdomTree – Is the Current U.S. Equity Market Rally Sustainable? – Market valuations have extended; however, correlations themselves have not gone up but, rather, have consistently declined. With a current base number of .16, they have enough upside to go before they reach alarming levels. (Sources: WisdomTree, Bloomberg, as of 7/31/17) In other words, any market correction now would probably offer investors ample time to cut their allocation to U.S. equities. In such an environment, missing on market participation because equities have run up a lot may be a painful strategy. In my opinion, for a moderate to aggressive allocation there is more to gain by riding equity allocations—especially to fundamentally strong companies and indexes built with a sensitivity to valuations.