Stock Market At Record High But Will It Last?

March 7, 2013
It would be wonderful to tell you that this great stock market rising trend can extend a lot further; but we don’t think it can.

The DJIA is at a record high through Wednesday’s close.  The S&P 500 is just 0.5% shy of setting a new record.  This good news is accompanied by a preponderance of upbeat forecasts for 2013.  Others (not ITR Economics™) are also forecasting an even better 2014.  When all seems right with the world, it is time for you to worry.  Specifically, we think it behooves you to be cautious about your expectations on how much higher these stock market indices are likely to go.

It has already been a better-than-normal rising trend in the S&P 500 with the Index up 122.9% since the crater in prices four years ago (February 2009).   It would be wonderful to tell you that this great rising trend can extend a lot further; but we don’t think it can.  We aren’t trying to time this market.  However, given what we are seeing (mild recession in 2014) is would be imprudent to simply assume even higher share prices ahead.

In previous blogs we have mentioned the need to watch the Housing Starts rates-of-change for signs of decay.  We already have decline in the bond market, and the ITR Leading Indicator™ may have peaked in January 2013.  The likelihood of seeing decelerating rise in Retail Sales is high given the tax increases put through by the federal government.  Throw in some concerns we have about the economic impact of Obamacare and you have grounds to reasonably think that corporate profits in 2014 will not be able to outperform 2013 (which are projecting to be a good year). 

If corporate profits aren’t continuing to rise, then the only thing left holding up the stock market is the loose monetary policies of the Fed.  That is not a good enough peg to hang your financial hat on.  Start taking your profits off the table and set trailing stop loss orders for those long positions where you don’t want to exit the market just yet.

About the Author

Brian Beaulieu | CEO

Brian Beaulieu has been an economist with ITR Economics since 1982 and its CEO since 1987. He is also Chief Economist for Vistage International and TEC, global organizations comprised of over 13,000 CEO’s. At ITR, Brian has been engaged in applied research regarding business cycle trend analysis and the utilization of that research at a practical business level. 

For the past 25 years, he has been giving workshops and seminars across the US and Canada to thousands of business owners and executives. 

Prior to joining the ITR Economics, Brian was an economist for the US Department of Labor where he worked on the health care component of the Consumer Price Index. 

Brian is co-author of the book, Make Your Move.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!