US Stocks Have Gone Nowhere for Two Years

Last week, the S&P500 inched up a very modest 0.17% on light volume. Volatility actually moved up a bit, in contradiction to the slight uptick in prices. While still very low, the rise in the VIX index suggests that investors are somewhat more nervous than they were a week ago.

Last week’s economic news was mixed, but certainly not showing any signs that US economic growth is about to accelerate. The Dallas Fed manufacturing survey came in negative….again. While new home sales beat expectations (slightly), the Case Shiller home price index missed badly, and pending home sales plunged (they were expected to rise). Consumer confidence beat expectations, and so did durable goods orders (but only because they didn’t fall as much as expected!). The Richmond Fed manufacturing index fell again. Wholesale trade also fell again. Personal spending missed; personal income only met expectations. Chicago PMI and international trade both beat expectations.

The technical picture for the S&P500 is not strong. More and more, it resembles a market that’s “hanging on by a thread”. Stunningly, over the past two years, the S&P500 has essentially gone nowhere—it’s now up only a couple of percent from where in was in late 2014. Remember, it’s now late 2016.

As an example of how hard it’s been to make money over this period, Cornell University—which has one of the largest university endowments in the US and some of the best & brightest advisors around—just reported that it LOST 3,3% in its most recent fiscal year. Cornell officials blamed the “low-return environment” for its horrible results.

So when all the pundits on Wall Street, and all the financial news reporters who echo them, scream every week that the US markets are doing well and that everyone should be jumping in with both feet, stop and think about the reality of the situation. The truth is that risk asset markets are very fully valued already, that these markets have gone essentially nowhere over the last couple of years, and that even the smartest and most sophisticated investors are struggling to make money from them.

In short, be careful.

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