We’ve all been on this ride before. The stock market is at an all-time high!
This past week, the Dow Jones eclipsed the 26000 mark for the first time in history and everybody is excited. The current bull market began nearly 9 years ago and is the longest running bull market ever. Even individual investors who got burned in the crash of 2008-09 have jumped back into the market and have long forgotten the period of time spent praying for their 401K’s to recover from that calamity. Right now, things are going good with our investments and our 401K’s look so promising that we can flirt with the idea of retiring and enjoying life in the sunshine.
However, in recent weeks some investment professionals have begun warning that the nearly nine-year-old bull market may be entering its “euphoria phase” — which typically marks the final stage of a long, upward climb for stocks. This stretch of a bull market is characterized by higher share prices, rising investor optimism and fresh cash being funneled into the stock market by investors who fear missing out on gains despite the market’s lofty levels. This “irrational exuberance” can lead to some very undesirable outcomes. So, now may be the time to secure those gains and quit while you’re ahead.
Martin Feldstein, one of the most influential Republican economists of the last 40 years, is warning that the stock market is poised to plunge. In a Wall Street Journal column with the headline “Stocks Are Headed for a Fall,” Feldstein argued “When interest rates rise back to normal levels, share prices are also likely to revert to previous norms,” he wrote. “…The implied fall in the market would reduce the value of household equities held directly and through mutual funds by $10 trillion.” This prediction comes as stocks continue one of their strongest runs ever, regularly setting record highs, and going for the longest period on record without even a modest 3% pullback. Feldstein was the chairman of The Council of Economic Advisers under President Reagan and an adviser to President George W. Bush credited with being one of the fathers of his administration’s tax cut plan.
In an effort to preserve savings and watch from the sidelines when the market inevitably collapses, many people are now pulling their money out of the stock market and reinvesting in two big areas, Real Estate and/or Franchise Businesses. The major benefit of this strategy is it can reduce portfolio risk at the same level of investment return. These returns have relatively low correlations with other asset classes such as stocks and bonds so regardless how the market is performing, your rate of return is unaffected. Additionally, with Real Estate or a Franchise, you have and maintain the ability to influence that assets performance. To speak with an expert and learn more, visit JPaytonconsulting.com.