Market Pulse: Market review and preview |

Market Pulse: Market review and preview

The S&P 500 rose 4.6 percent in the second quarter and reached new highs. Bonds have rallied, too.

Times are good. Still, there are those who insist that what is (and has been) happening in the real world shouldn’t be happening in theory or not according to this or that measure that was relevant in the past.

There are always some of those, usually people who are not invested at all in stocks and haven’t been for years.

To stimulate the global economy central bankers in Europe will soon do all they can to boost growth and inflation even as our Fed slows and then halts its bond and mortgage buying program (QE).

What does this all mean for investors? A lot … and little.

First, the “a lot” part. The macro picture is of great interest to economists and many of us in the business. It’s even of interest to some in the media and a few politicians on Capitol Hill. It should be of interest to everyone.

The reason is simple. If the economic pie isn’t growing at a good clip (2.5 to 3.5 percent annually), standards of living will stagnate and opportunities for millions of people will be few and far between.

We’ve seen the consequences of lackluster growth since 2009. Millions of people have left the workforce, some retiring but many simply giving up. Millions more applied for food stamps and government programs.

Now the “little.” Investors are dealing with very simple numbers and choices. The 10-year Treasury note yields about 2.6 percent, which means in stock terms it’s trading for 40 times earnings.

There will be no growth in the bi-annual interest checks. They’ll be the same for ten years. Of the S&P 500 companies, which are trading for 16 times earnings, 148 stocks have dividend yields greater than the ten-year Treasury.

And most will increase their dividends over the next ten years, some doing so every year. Hmmm. What to do?

Bottom line: Investors see stocks as a far better value, and they’re right. The bull market will continue, not climbing a “wall of worry,” but frustrating those who continue to insist that it shouldn’t rise at all.

They still don’t get it. Investors have nowhere else to go.

David Vomund is an Incline Village-based fee-only money manager. Information is found at or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.

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