Have You Been Riding the Stock Market Rocket Ship?

All three major stock market indices continued to hit all-time highs last week.  A definite boon to those who own individual stocks, mutual funds and ETFs.

And for those who do not have direct investments in the stock market, you, too, are likely benefiting since public and private sector pensions rely heavily on investment returns to be able to meet future obligations and insurance companies use investment returns to, in the big picture, keep our insurance premium increases low.

In the stock market world, things are great!

Let’s take a look at what returns were generated during the third quarter of 2017.

2017 Third Quarter Returns

The Dow Jones Industrial Average increased 1,055.46 points for a percentage gain of 4.94%

While the S&P 500 rose 95.95 points during the 3rd quarter for a percentage gain of 3.96%.

And the Nasdaq climbed 355.54 points, increasing 5.79% for the quarter.

Year-to-Date Returns

The year-to-date (1/3/17 – 10/20/17) return numbers are:

Dow Jones Industrial Average – Up 3,566.03 points / +18.04%

S&P 500 – Up 336.38 points / +15.02%

Nasdaq – Up 1,245.93 points / +23.15%

These are stellar numbers.  And the stock markets show no signs of slowing anytime soon.

Why Such Large Gains

As with most things, the answer is not simple.  There is a combination of factors leading to the continued climb of the U.S. stock markets.

The primary factor and the one that’s been in force since the Great Recession in 2009 is the Federal Reserve’s decision to keep interest rates at historically low levels.

With interest rates near 0%, investors – both domestic and foreign – find U.S. bonds less attractive as a money generating investment and instead funnel money into U.S. stocks.  Which increases the prices of stocks and the markets overall.

A second, and somewhat less loosely related reason, is the hope for a reduction of taxes as a result of a tax reform package passed by the U.S. Congress.  Specifically, the lowering of the corporate tax rate to a more globally competitive rate.

Of course, corporate earnings – the old-fashioned way of determining whether a stock increases or decreases – have been good, leading to the upward tick in many stocks.

Those factors aside, it’s my feeling that the main reason we’ve seen these continued increases, at least as far as 2017 goes, is that for a long time, large amounts of money have been sitting outside of the stock market just waiting to see what would happen.  This rally has not always been considered legit.  Many have been waiting for the steam to come out and the markets to drop.  But that hasn’t happened.  And so, all that sidelined money has decided to finally join the party, pushing stock market returns higher and higher.

Which is good.  Until it’s not.

A few stats to throw out there.

Since the 1920s, the average Bull Market (Good) has lasted 9 years, while the average Bear Market (Bad) has lasted 1.4 years.

The longest Bull Market during that period was 15.1 years with the shortest being just 2.5 years.

Our last Bear Market was associated with the Great Recession.  The U.S. markets have been increasing for the past – roughly – 8.5 years.

As is always said, past performance should not be considered indicative of future performance.

However, I can guarantee you this, the markets will turn down at some point.  The only questions are when and by how much.

Wrap Up

We at Savings Beagle are not investment advisors.  It’s not our goal to encourage you to put your money into the markets, or to sell if you already have invested.

Rather, it’s to provide information to help illustrate the current state of the U.S. markets which can help guide your financial decisions.

Saving money – whether by investing in stocks, bonds or by simply putting a set amount into a savings account on a regular basis – is critical to your future financial well-being.

And we’re here to relay money saving deals and tips to make finding that excess cash that you can put to work a little easier.

If you haven’t already, bookmark our site, follow us on Facebook, join us on Twitter or subscribe to our posts to ensure you receive every savings opportunity we’re able to pass along.

Saving money and planning for the future’s hard – we’re here to help make it a little easier.