The Stock Market Party Must Eventually End

The market’s continued gains may “not be such good news for investors,” according to a recent article in The New York Times.

The article offers insights of market historian and InvesTech Research president James Stack: “If there are any certainties, one will be that this party will eventually come to an end. A correction would be healthy. The longer we go without one, the greater the risk this will end badly.”

The article points out that while Stack and other market experts don’t see an imminent correction, they agree that the market is overvalued. It quotes renowned economist Burton Malkiel, who advises investors to rebalance portfolios in order to stay aligned with their risk tolerance.

According to the article, Stack’s analysis of bull markets over the last 50 years has revealed that both technology and energy sectors outperformed in the late stages, and suggests that investors have “some portion of their portfolio in the materials sector, notably energy,” which had been out of favor until mid-2017.

While market skies remain blue and no one can predict what might trigger a correction, Stack says investors should be alert, adding that even a “hint” that the Fed will boost rates higher than expected could set off a correction.

He concludes, “Most bull markets die by the sword of the Fed.”