Is The Stock Market Melting Up?

• (0:45) - Never Ending Stock Market Melt Up
• (5:30) - Melt up Recipe: What Will Slow It Down?
• (10:00) - Are Stocks Expensive or Overvalued?
• (16:45) - Small Cap's
• (25:00) - Takeaways On The Market: Podcast@Zacks.com

Welcome to Episode #116 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

In this episode, Tracey is joined by Kevin Cook, Zacks Senior Strategist and podcast host of Mind Over Money, to discuss the sizzling hot stock market.

Stocks are off to a fast start in 2018 with all of the major indexes hitting new record highs nearly every day.

Yet, Tracey has been unsettled by the mania that has gripped some stocks. No, she’s not concerned about the FANG stocks or the semiconductors being too hot to handle. They are relatively tame right now compared to what is happening in other sectors.

It’s the 100-year-old industrials that have her worried. Investors are pouring into the big cap industrials as if valuations didn’t matter. Many are trading at 25x or higher.

Kevin’s Melt-Up Recipe

Kevin provided three ingredients in the melt-up recipe that investors should keep in mind.

1. Multiple Expansion Is Under Control: We may be in the 6^th inning of this bull market, but multiple expansion isn’t yet as high as it was at the peak of other bull rallies like 1999-2000. There could still be more upside to go.

2. Competition: There’s less stock and more investors. Additionally, Wall Street, unlike most retail investors, has to buy, but doesn’t have to sell.

3. No global macro worries: Whatever happened to the Eurozone crisis or China having a hard landing? For the first time in a decade, the global economy is in sync and growing at the same time with virtually no economic crises looming.

Is Boeing Too Hot to Handle?

Boeing’s (NYSE:BA) big move higher in 2018 has Tracey on edge. Over the last year, the shares have gained over 110% with a jump of 13% in just 2018 alone. While the Dow has been hot as well in 2018, it’s up just 5.5% on the year.

What is causing Boeing’s sizzling move higher?

Boeing is now trading with a forward P/E of 28 which, it turns out, is about the same as that of Facebook (NASDAQ:FB).

Is the big move in the industrials a sign of a market melt-up?

What Other Stocks Look to be Melting Up?

1. Square (NYSE:SQ) has a forward P/E of 97. Year to date it’s up 25% after being up 210% over the last year. Yes, it’s a blockchain play but how much should investors be paying for it?

2. Nvidia (NASDAQ:NVDA) has been a high flier for the last year. Shares are already up nearly 20% in 2018. With a forward P/E of 55, is it too hot to handle for new investors? Or does all the AI business justify the valuation?

3. Netflix (NASDAQ:NFLX) just reported a stellar quarter which pushed shares to new highs. They’re up over 24% to start 2018 and trade with a forward P/E of 97. Do investors even care about valuations with some of these high fliers?

With so much buzz around a few big cap stocks, is there an industry where investors can find some value?

Kevin and Tracey say to look at the energy shares. Many energy stocks aren’t even hitting 52-week highs, let alone record highs.

Tracey likes Pioneer Natural Resources (NYSE:PXD) , a big E&P player in the Permian Basin. While shares are up about 7% year-to-date, they’re only up 1.4% over the last year.

Should You Be Buying Stocks Now?

The biggest question during a market melt-up is whether or not to still get in.

Should you wait for a pullback or is this melt-up going to last a while?

Find out the answers to all your melt-up questions on this week’s podcast.

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