Why Are Markets So High?

Why are the market so high? That’s a very good question. It seems irrational that markets are as high as they are now given all the uncertainty that we see in the world. Impeachment trials, disease outbreaks, Mideast tensions, and political uncertainty still have not negatively affected the markets. It’s understandably perplexing.

While there is no certainty as to why market sentiment is high (besides the obvious fact that there are more urgent buyers than sellers pushing prices up), there are a few charts that I think might give you some insight into why markets are at elevated levels.

Economic Optimism Index

Investors and consumers are optimistic that the economy will continue to be strong. Sentiment drives markets and there is a dose of euphoria that currently exists.

Low Unemployment

Low unemployment means more workers have funds to buy products that drive the US economy (a 70% consumption economy).

Low Inflation

Low inflation means purchasing power is not being eroded by rising prices.

These three charts provide some indication of why markets continue to rally here in the United States. Be aware that while this data may suggest there is rational evidence why markets are high, markets are driven by emotion and sentiment and not rational thought. There are many other charts that one could examine that suggest the market should not be as high as it currently is.

The three slides provided are a subset of the information I will cover during our annual 2020 Outlook presentation in the near future. We will provide an online version as well as live presentations in selected locations to outline in detail our views on the economy, markets, and portfolio positioning. Watch for updates when this information will be available to you. 

If you have any questions about this information, please let us know.  Always happy to help.