The global bull market is thriving and is into its eighth year of gains. Now, stocks are pricey, but the rally is showing no signs of slowing down.
Stocks could reach a cap if this quarter’s earnings reports come in under expectations or if the world’s economy touches a period of slow growth.
Thanks to forecasts of double digit earnings growth, stock’s valuations may not be too bloated, given 2016’s earnings came in at just 2%.
The US rally has outpaced those of Europe and other developed nations.
Meanwhile, volatility remains at record lows. Traditionally, high returns are associated with high levels of volatility. Meaning investors have reaped the values of both record highs without coming into bear markets and getting knocked out of their positions. The biggest sell-off for the first half of 2017 was just 2.8% (the second smallest pullback on record)
For example, the S&P 500 only closed 1% lower on four occasions, meanwhile it made 24 new highs. Returns were two times historical levels (8.2%).
However, not all is quiet in equity markets. The technology sector has decreased in the last month. The Nasdaq 100 Volatility index (a measure of volatility in US technology stocks) has hit 18.7 when it was at 13 just a month earlier. Compare that volatility to the Vix, the S&P 500’s carefully tracked fear measure, remains at all-time lows, at 11.
A technology stock reverse was imminent, but the fundamental facets of the industry look strong. With this in mind, the equity market looks like a safe bet, for now at least.