Posts Tagged ‘inflation’
It’s an amazing performance that few people predicted at the beginning of the year—this stock market might just keep on climbing right into the New Year.
Just recently we looked at Automatic Data Processing, Inc. (ADP) as it broke a new all-time record high of $77.00 a share. Now, the position has surpassed $80.00 a share, still boasting a 2.4% dividend yield. It was $60.00 a share in January.
The stock market should have experienced a major correction this year, but it consolidated during the summer and reaccelerated instead.
The huge price movements of so many large and mature enterprises are not unusual in the historical performance of the stock market. In the middle of 1998, ADP was $30.00 a share (split adjusted). Two years later, the position hit a new, all-time record-high around $60.00 before correcting with technology stocks.
ADP and so many other positions illustrate the power that monetary policy has on the stock market’s business cycle. Clearly, equities today are overbought, but institutional investors have to be buyers, because investors don’t pay fees to have money sitting in cash.
While I feel that the stock market can close this year out strongly, generally speaking, I am not enthusiastic about investors buying this market. The fundamentals are slowly coming together to support the case for rising equity prices, but all the good news in terms of balance sheets and earnings outlooks are already priced into this market. Anything can happen going forward, but expectations for investment returns have to be extremely low if one is buying a stock market that’s already gone up.
A profound and prolonged correction … Read More
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