But not all was shiny patent leather, ready to party. The technology and communications sectors continued doing well, while small companies’ stock prices and value stocks advanced only slightly. In fact, Value is beaten down to the point that Growth stocks now have the same high relative valuations they had back in 2000. The early 2000’s eventually proved to be one of Value’s best runs. We don’t know if that will happen again, although this extreme will probably lessen one way or another.
There were also a number of economic points that could eventually weigh on our economy and on U.S. stock prices:
- Auto sales cooled in Q3.
- Interest rates continued their climb and the Federal Reserve expects to raise rates once more before the end of the year.
- The price of oil continued to increase and inflation overall has returned to about 3% per year.
- House sales cooled as mortgage interest rates continued to slowly rise.
There are many positives for the U.S. economy though, including:
- Low unemployment and continuing healthy job growth,
- Last year’s tax cuts are still working their way through the economy, and
- Credit growth remains strong, despite increases in interest rates.
In summary, there are many positive points that could keep our economy and stock market growing nicely. As we know, however, nothing lasts forever and at some time negatives will outweigh positives and the time will come when we see it in our returns. Since we have no way of knowing when that will occur, we will continue our mantra of staying invested for the long term.