Rising Corporate Profits, The Longest Bull Market and Happy Employees
By: Kevin Dombrowski
As of 7/31/18
Past performance is not an indication, prediction or guarantee of future results.
Weekly Update
Stocks rose this week as US corporate profits were up 16.1% looking back at this point a year ago in the second quarter. These profits are aided by strong economic growth and the large tax cuts, fueling the growth of what is now considered to be the longest bull market ever. Additionally, soaring earnings in small and tech companies send both to all-time highs. 
How good has this August been? At 3.5% growth as of Thursday, it’s the best August since 2014. However, some analysts caution investors, especially considering Septembers historically are rocky times for the markets and even worse in midterm election years. Plan on much of this rally to slow down or reverse in the next month.  There are additional headwinds making this even more likely including turmoil in Italy, US trade tensions with Canada and Mexico, rising interest rates, and threats of additional tariffs against China. 
If all the threatened tariffs against China are implemented, it will affect roughly 50% of US imports from China. This will eventually hurt retail sales and distress the markets.
Longest Bull Market Ever
With the news last week of this bull market officially becoming the longest ever, you might be thinking it is time to take some risk off the table and to decrease your equity exposure. After returning more than 400% since the bull market began, US stocks aren’t cheap. In fact, they are selling at about two times their long-term average earnings, according to data from economist Robert Shiller . Pair this with rising interest rates, fear of trade wars, and global contagion in places like Turkey and Italy. Should you sell and store those gains in cash?

Not necessarily. 2018, like 2017, 2016, 2015, and every other year, is filled with uncertainty, risk, and speculation. Many experts say that the best approach is to not change course. If you or your trusted advisor insists on pairing back equity exposure, consider doing so prudently.  One way to do that is to consider scaling back your exposure slowly over a longer time frame (for example, 6-12 months). Also, if you are working to meet goals within a shorter time horizon, this may provide the right time to work with a trusted financial professional to ensure you have proper protection to a variety of doomsday scenarios using historical data as a proxy. 

Remember, by and large, investors mistime the market. We buy high and sell low. With such an emotionally challenging market, the best thing you can do is ensure your goals are appropriately calibrated based on your tolerance for risk and time horizon and stay that course.

Happy Workers
According to a report from the Conference Board , US workers – 51% - said they were satisfied with their job in 2017. This is the highest level recorded by the survey since 2005. What is driving this? Largely the economy. In aggregate, workers feel better about their pay along with a greater sense of job security. With jobless claims in July hitting its lowest level in nearly 50 years, it is no surprise with this finding. Additionally, this survey shows that American workers report being most content with their colleagues, their commutes, and their interest in work.
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