Market Recap – Guessing the Top of a Bull Market is a Fool’s Game

in Market Commentary by

Market Digest – Week Ending 8/5

A second consecutive strong US jobs report propelled stocks to a modest gain for the week, while pushing bonds lower. The Bank of England cut rates and announced yet another round of bond purchases. The Olympics were set to kick off on Friday afternoon, and Trump had a bad week in the polls.

Weekly Returns:

S&P 500: 2,183 (+0.4%)
FTSE All-World ex-US: (-0.3%)
US 10 Year Treasury Yield: 1.59% (+0.13%)
Gold: $1,336 (-1.1%)
USD/EUR: $1.109 (-0.8%)

Major Events:

•Monday – Uber sold its Chinese division to local rival Didi Chuxing. Uber will get a 20% stake in the business and Didi will make a $1 billion capital investment in Uber.
•Tuesday – US consumer spending increased 0.4% in June, ahead of expectations.
•Tuesday – Aetna announced it is losing money on Obamacare business and will cancel its Affordable Care Act expansion plans for 2017 and may exit the program altogether.
•Wednesday – Following Brexit, the UK services sector shrank at the fastest pace since 2009.
•Wednesday – Following a failed merger with Staples, Office Depot announced it will start paying a dividend and close about 300 stores.
•Wednesday – TIAA was said to be in discussions to buy Florida’s Everbank for $2.5 billion.
•Thursday – The Bank of England cut its interest rate to 0.25%, the lowest in history
•Friday – The US added 255,000 jobs in July, ahead of most expectations.

Our take:

Famous investors such as Bill Gross and Jeff Gundlach have been sounding alarms about the capital markets with increasing frequency. Meanwhile, the S&P 500 closed the week at yet another record high and the US economy continues to produce jobs with impressive frequency.

Stocks are priced at higher valuations than historical averages. And interest rates are at record lows. But trying to guess the exact top of a long, powerful bull market is a fool’s game. This bull maintains formidable momentum. When it finally gives way, it is much more likely to roll over slowly than crash suddenly. Way back in February it was starting to look like that may have been happening. But five consecutive months of gains later tell a different story.

I particularly enjoy reading Bill Gross, but he doesn’t know where the stock market is headed any more than anyone else. If markets keep rising and everyone turns bullish, it may be time to worry. Right now it seems to make more sense to focus on enjoying the remainder of the summer season.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk is a member of the Personal Capital Advisors Investment Committee. He also serves as Vice President of Portfolio Management. Prior to Personal Capital Advisors, he was an integral leader within the portfolio management team at Fisher Investments. During Craig’s time there, the company increased assets under management from $1.5 billion under management to over $40 billion. His responsibilities included risk management, portfolio implementation oversight, and management of all securities and capital markets research analysts. Mr. Birk graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

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