Five years ago in financial economic history, the situation was a lot like today.
The stock market was fully valued by traditional measures, making stocks more susceptible to a correction, but the economy was accelerating.
Five years ago, the stock market looked risky. Stocks had gained 77% in 2012, 2013 and 2014, before taking a breather in 2015 and 2016.
Stock valuations had climbed sharply from their lows in The Great Recession. In that period, the market’s price-to-earnings ratio rose from way undervalued — trading at 12 times 12-month trailing earnings — to flirt with overvaluation, at 18.2 as of mid- June 2016.
How did things turn out?
On June 24, 2016, England voted to “Brexit” from the European Union, and the stock market plunged 5.3% but rebounded within a few days.
The current financial economic outlook is quite bright but stock valuations are high by traditional price-earnings benchmarks.
Past performance is not a guarantee of what will happen in the future but in the last five years the S&P 500 total return index more than doubled in value.
As fraught as these times may seem, five years ago in financial economic history the situation for investors was a lot like today.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.