Market Recap – US Stocks At An All Time High, Again

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Market Digest – Week Ending 11/25/2016

This Thanksgiving week proves the “Trump rally” marched on. While the S&P 500 advanced 1.4% and closed at an all-time high, small cap stocks continued their torrid run. The Russell 2000 small cap index has now advanced for 15 consecutive days, the longest such streak in 20 years and just 5 shy of the longest ever. Unlike the first two weeks following the election, advances were broad based and most economic sectors behaved similarly. International stocks participated this week, up a similar amount as US stocks.

Weekly Returns:

S&P 500: 2,213 (+1.4%)
FTSE All-World ex-US: (+1.3%)
US 10 Year Treasury Yield: 2.35% (+0.0%)
Gold: $1,183 (-1.9%)
USD/EUR: $1.059 (+0.0%)

Major Events:

• Monday – Year over year economic growth in developed countries rose 1.7% in Q3, which was ahead of most people’s expectations.
•Tuesday – The Dow closed above 19,000 for the first time.
•Tuesday – US existing home sales in October rose 5.9% from a year ago to the highest rate since 2007.
•Wednesday – Dr. Pepper Snapple group bought Bai Brands for $1.7 billion and Pepsi bought KeVita for $200 million.
•Wednesday – Minutes from the November Fed meeting showed a split opinion with a majority favoring a rate hike “relatively soon,” which suggests it will happen in December.

Our take:

A MarketWatch opinion headline from this week read, “Stocks at all-time highs call for extreme caution.” Indeed, at some point a bear market will come. But just because stocks are high isn’t a great reason to sell. Since 1950, the S&P 500 has closed at an all-time high 1,157 times. If you had sold out at any of them you would have felt good for a day or as long as eight years, but history shows that the market continues to make old all-time highs seem, well, not so high.

Some investors are lucky enough to buy back in at lower levels, but many more simply miss out on gains. One area nowhere near record levels is international stocks. The FTSE All-World ex US index sits about 15% lower than it did ten years ago. For the last few years, rebalancing out of US stocks into international stocks has felt foolish, but that is typical toward the end of these streaks, which frequently last 7+ years. At some point, we expect this kind of rebalancing will be rewarded nicely. We don’t think now is the time to give up on US stocks, but we’d agree it isn’t the right time to have significantly more than your long term strategy calls for either.

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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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