Is The Stock Market Too High Right Now?

turned on monitor displaying frequency graph

Indicies closed yesterday at new all time highs. The S&P 500 is at $4170 and the DOW is at $34,070. Whenever new highs happen the major question arrises, “Will there be a correction?” No one is capable of knowing the answer, and no one ever will be.

However, recent numbers and facts point to a positive outlook for the coming months. Will there be small corrections along the way? Absolutely, but nothing too major I believe. Let me tell you why.

Unemployment is lower

Every week the Department of Labor comes out with the number of individuals filling for unemployment relief/benefits. Last week, a total of 576,000 people filled for unemployment benefits. The lowest number since the start of the pandemic in March 2020. The week before, the number was 769,000. (https://www.dol.gov/ui/data.pdf)

The Consumer Confidence index increased significantly in March. This is a survey taken by consumers like you and I regarding our optimisim about the country’s economic state. The higher the number, the more confident people are about the state & growth of the economy for the coming months. Opinions on inflation, interest rates, stock prices, vacation plans, etc are accounted for. The number for March reported 109.7, the February number was 90.4!! (https://conference-board.org/data/consumerconfidence.cfm)

Increase in consumer spending

According to the Department of Commerce, retail sales increased nearly 10% by the end of March. The measurment analyzes retail stores, restaurants, and online stores numbers.

People are more confident going out and spending money. Not just going out for work and neccasary travels. Consumer spending is the #1 economic driver, if this is increasing, the economy is in a good place. Consumer spending is still low when compared to pre-pandemic times. There is still a lot of room to grow.

Warmer weather will also drive consumer spending. Historically, the summer months are when individuals spend the most. It only makes sense, people are sick of being stuck inside in the winter. This combined with the country starting to open up again…

Vaccine increase

As the weeks go on, more and more people are recieving the vaccine. Within the last 2 weeks all New York residents over 16 are eligible for the Pfizer vaccine. Not just individuals with a health issue are eligible.

It is also worth mentioning some states are lifting mask mandates, and loosing restrictions. A total of 12 states have lifted their mask mandates. Alabama, Arkansas, Indiana, Iowa, Mississippi, Montana, North Dakota, Texas and Wyoming. https://www.aarp.org/health/healthy-living/info-2020/states-mask-mandates-coronavirus.html#:~:text=To%20date%2C%2012%20states%20that,by%20court%20order%20(Wisconsin).

Herd immunity is something that often goes under the table. As time goes on, more and more people are exposed to the virus. The more people who get infected, the less people are avalible to get infected. Which then decreasing the number of cases.

MLB allowing fans?

The MLB is back and allowing fans to attend games. For both New York teams a Covid-19 test is required 72 hours prior to entering the stadium, or proof of vaccination. Both stadiums are under a 20% capacity limit however.

This is a huge step forward in a return back to pre-pandmeic life. It is a sign of normalcy that we all need.

What about the market?

As I mentioned earlier the market is at its highs. I hate it when this happens because there are very few stocks at good buying opportunities. I never buy during times like this, I wait for the small corrections. Whether they are weekly or monthly. I reccomend you do the same because we WILL see corrections. The best thing we can do as investers is not be greedy. Buy at the low points, and sell at the highs.

As far as a major correction goes for the next 3-6 months. I believe it is unlikely. The numbers state that the country is opening up, people are getting vaccinated, and consumer spending is going up.

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