Is The Market Growing Too Fast?

Max Smith, CFP®, CIMA® | Kent Forsey, CFP® Blog, Client Education

Bull Bear Market PictureSince the last bear market reached bottom in March of 2009, the S&P 500 has roared back 179%. As Dr. David Kelly of J.P. Morgan points out, “with the exception of the bull markets that started in 1982 and 1987, this has been the strongest bull market since the late 1940s.” (J.P. Morgan Market Insights, May 13, 2014)

The question many are asking themselves is: “Has it gone too far? Is it time to back off on our weighting to stocks?” Interestingly, half of our analysts are now more cautious and the rest still see more room to grow.


  • The economy is still moving forward, but not nearly as fast as the market has grown the past couple of years.
  • Europe is climbing out of their debt problems, albeit very slowly.
  • Some concern has been centered on China and its economic “bubble”.
  • Headlines are focused on Russia and the Ukraine.
  • Probably the biggest fear in most investors’ minds is the painful memory of 2008.

On the other hand:

  • Our economy is still expanding, which helps corporate profits. Though the first quarter was quite weak, we still expect relatively strong economic growth for the rest of 2014 (2.7% to 3%).
  • Interest rates and inflation continue to be under control.
  • Though stock valuations are not cheap anymore, they still have room to grow.

Since no one knows who is right, we must be fully prepared for either scenario to play out. In other words, we need to be positioned to take advantage of gains when they come and minimize losses as they appear. The only way to accomplish this is to establish portfolios specifically designed to exactly match your risk comfort level for either scenario.

Our “RiskPro” method of precisely specifying and implementing your individual tolerance for volatility and downside helps give us the comfort we need during uncertain times.

Don’t hesitate to contact us if you have specific questions on any of this.