The S&P 500 gained another 3% in November to obtain a new high level mark above 1800. These are new historic levels and should give all of us something to be thankful for this year.
Now for the downside of strong stock market returns…
With high returns comes high expectations. As investors, we often succumb to “recency bias” where we start to believe that what has occurred recently, will continue on in the future. In 2009 investors felt as if the market would continue to zero. Now with the market hitting new highs investors may start to get complacent and expect high returns every year.
While we are not seeing any of the typical warning flags that we associate with recession or market declines, we do want to help investors stay grounded in their view of markets and risk.
Over the next week, we will get additional economic data that will give us a clearer picture into where the economy and markets may be heading for the remainder of the year.
Today: ISM Manufacturing Report
Wednesday: ADP Employment & ISM Services
Thursday: GDP Q3 First Revision
Friday: November Employment
If these reports come in with favorable outcomes it’s likely that higher prices could be on the way for the Christmas season. If not, Santa may be forced to deliver a lump of coal this Christmas.
All kidding aside, it has been a very good year for equity investors. As things stand today, the data continues to support the current bull market. November through May is seasonally the strongest part of the year and we see nothing that leads up to think it will be different this time.
As always, if and when the facts change – so shall we.
