Stocks across the Nasdaq, S&P 500 and Dow Jones Industrial Average are flirting with new all-time highs. Many investors are wondering how much longer this bull market can run.
As Steve McDonald explains over the next two minutes, while stocks may look pricey, there’s one big piece of evidence that shows why they still have plenty of upside potential.
Transcript:
In 2001, only 36% of working Americans were not in the stock market – either individual stocks or funds.
Today, 52% are out of the market. And for younger investors, the numbers are even more lopsided.
That leaves a lot of people shunning stocks because of the fear of another 2008/2009 or because they believe the market is topped out.
History tells us the huge number of people who are out of the market means there is a ton of buying yet to be done. And it will happen.
And this fear of stocks will cost many retired people a lot of money over the next 20 to 30 years. You cannot make up for two to three decades of inflation with interest-only investments. And that is exactly what most of the 52% who are out of the market are holding.
Yes, I know, the market looks very pricey. But consider this.
One of the signs of an overpriced market is overexuberance or overly aggressive small investors. With most people still out of the market and an increasing number of the younger generation shunning stocks, you’d have a tough time justifying overexuberance.
And… We topped out in 2008 at 14,100 on the Dow. We’re around 18,000 now. That’s only 650 points a year on the Dow since the rally began in March of 2009.
That’s not unreasonable!
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If you are one of the many still on the sidelines because you think this market is topped out, you need to think this through.
In almost all cases, countering the effects of 30 years of inflation means you have to own some stock.
No matter how much the banks are paying in interest, but especially in this zero interest rate market, sitting on the sidelines is nothing but a slow-motion sell-off that most folks don’t recognize until it is far too late.
Yes, our gambling days are over, but that doesn’t mean we can hide out in cash, CDs, money markets or interest-only investments, losing a little money every year to taxes and inflation, for the next 20 to 30 years.
We can’t do that!
You have to own the right percentage of equities in your portfolio as your age dictates and, obviously, the lower-risk equities.
Overcome your fear of stocks or get ready to deal with the long-term outcome.
Believe me, shifting gears now will be a lot easier than the alternative of being inflation-poor.