The Stock Market Continues to Push to New Highs

Stock Exchange

On Tuesday, August 26, the S&P 500 Index closed above 2000 for the first time ever.  After lagging earlier this year, the small caps, represented by the Russell 2000 Index, have given the strongest showing of all the major indexes since August 1.   And the NASDAQ is less than 10% away from its all-time record high set in March of 2000.

In our view, this mature rally continues due to historically low interest rates.  Investors appear to disregard the tapering of the government stimulus, as buyers remain in control across many sectors.  Any talk of rising interest rates gives investors pause, but as long as the economy is not too hot and not too cold, and interest rates remain near zero, the stock market is the place to be.

Watch for rising interest rates and a narrowing of the participation among industry sectors to indicate the market may be topping.  For now, the bulls are in charge.  Any change will certainly demand attention and a strategy to control the risk.   The old adage, “the higher they rise, the harder they fall” may be appropriate to keep in mind as this market continues to rise.  Markets do not go up forever, and a plan to control the risk in the next decline is prudent.

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