Kevin Kroskey's Market Commentary

June 14, 2010 Weekly Commentary

The Markets

Which country is the most attractive market for investors?

Perhaps Brazil? Russia? India? China? Collectively, those four are known as the "BRIC" countries and for a number of years, many investors have pointed to them as economic stars. However, in a global quarterly poll of investors and analysts who are Bloomberg subscribers released on June 8, "Almost four of 10 respondents picked the U.S. as the market presenting the best opportunities in the year ahead." That placed the U.S. #1 on the list followed by Brazil, China, and India.

Of course, this is simply the opinion of a group of investors and analysts and it does not mean that the U.S. will turn out to be the best market. But, it does raise an interesting observation, which is… there are countries with good economics and countries with good investment opportunities--and they are not always the same.

Here's what I mean. In the first quarter of 2010, Brazil, India, and China's economies expanded at an annual rate of 9.0%, 8.6%, and 11.9%, respectively, as measured by gross domestic product, according to Bloomberg. That's huge. By contrast, the U.S. economy expanded at a relatively modest 3.0% in the first quarter, according to the Bureau of Economic Analysis. On the surface, you might think that the three countries with the highest economic growth rates would also present the most attractive investment opportunities. Possibly yes, but the latest survey from Bloomberg put the good ol' USA in the #1 spot.

Why would these investors and analysts put a slower-growing U.S. ahead of fast-growing Brazil, India, and China? There could be numerous reasons, but a simple takeaway is this--in the short-term, good economics does not always translate into good investment opportunities. For example, if the fast economic growth in Brazil, India, and China was already "priced into" their financial markets, then the near-term outlook for stock prices might be muted. Conversely, if the modest growth in the U.S. helped drive our stock prices down to a relatively low level, then we might be in the best position to experience a bounce from this "oversold" condition.

This is a long-winded way of saying short-term market movements might not reflect current economic realities.

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable or not available.

DID YOU FEEL WEALTHIER in the first 3 months of this year? Well, believe it or not, the net worth of U.S. households rose by $1.1 trillion in the first quarter, according to the Federal Reserve. Most of this increase came from rising stock prices. And, if you believe economists, each extra dollar of wealth should generate about 5 cents of spending over time, according to MarketWatch. Dubbed "The Wealth Effect," it suggests that rising stock prices could lead to a virtuous cycle of higher spending, higher corporate earnings, and higher stock prices. That's the good news.

Here's the bad news. The theory also works in reverse.

Yes, household net worth was up in the first quarter, but it is still down about $11.4 trillion from its early 2007 peak, according to MarketWatch. And, with the roughly 7% slide we've seen in S&P 500 so far in the second quarter, we may see the net worth number drop when the second quarter data is released in a few months.

This net worth data and the stretched balance sheets of many Americans leaves us with a conundrum. On one hand, consumer spending accounts for about 70% of U.S. economic activity, according to Associated Press. So, if we want robust economic growth, we need consumers to open their wallets and start buying stuff. On the other hand, the pragmatic observer says consumers are already too much in debt and need to curb their spending and build up their savings. This could lead to slower growth.

Essentially, we can keep spending by going deeper in debt and hope we can "leverage" our way to prosperity. Or, we can cut our spending, increase our savings, and gradually build our way back to a sustainable growth rate. Both scenarios would likely cause some pain. The former scenario would likely delay the pain. The latter scenario would likely speed it up.

Sooner or later, don't be surprised if we enter an "Age of Austerity" that enables (forces?) consumers to reduce their debts, and, after a painful adjustment, puts our country back on a path to prosperity.

Weekly Focus – Think About It
"I have learned, as a rule of thumb, never to ask whether you can do something. Say, instead, that you are doing it. Then fasten your seat belt. The most remarkable things follow." --Julia Cameron

Best regards,

Kevin Kroskey

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* This newsletter was prepared by PEAK.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Past performance does not guarantee future results.
* You cannot invest directly in an index.

June 7, 2010 Weekly Commentary

The Markets

Despite the blaring headlines of late, the U.S. stock market has been stuck in a broad trading range since last September.

It's easy to get caught up in the daily gyrations of the stock market's ups and downs, but when viewed through a longer-term lens, the S&P 500 index has been pinballing between a range of about 1,040 and 1,217. The low end of the range was established in mid-September of last year and the high end of the range was reached in late April of this year, according to data from Yahoo! Finance. Last Friday, the index closed at 1,065, which is near the low end of the range. Range-bound markets are not unusual and with the big rise we've had since March 2009, some consolidation of those gains is par for the course.

A History of Declines (1900 - December 2009)

Source: Capital Research and Management Company

(1) Assumes 50% recovery rate

(2) Measures market high to market low

As of last week, the Dow was in the "-10% or more" category, according to CNNMoney.com. This was the first decline of 10% or more since March 2009, according to Barron's. Looking at the chart above, the current decline puts us right in line with the historical frequency of such declines.

We realize that market declines are not enjoyable even if they are in line with historical frequency. However, knowing where we stand within the context of history can help us make clearer and less emotional decisions as it relates to investment strategy.

Weekly Focus – Think About It
"The trend is your friend except at the end where it bends."
--Ed Seykota

Best regards,

Kevin Kroskey

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* This newsletter was prepared by PEAK.
* Past performance does not guarantee future results.
* You cannot invest directly in an index.

June 1, 2010 Weekly Commentary

The Markets

"Sell in May and go away" is a popular Wall Street adage. After the May we just experienced, investors are saying, "True that!"

According to a May 1, 2008 CNNMoney.com article, "The old 'sell in May' strategy says that if you invest in the S&P 500 or the Dow industrials during the 'best six months' (November through April) and then switch into bonds during the 'worst six months' (May through October), you'll end up with better returns than if you did the reverse." In fact, a study by Plexus Asset Management as reported by InvestmentPostcards.com, showed that between January 1950 and March 2009, the S&P 500 index returned 7.9% per annum during the "best six months" and only 2.5% per annum during the "worst six months."

The S&P 500 performed better during the "best six months" due to seasonal factors such as end-of-the-year bonuses, the "Santa Claus" rally, and the timing of tax refunds and quarterly earnings results, according to the CNNMoney.com article. Of course, past performance is no guarantee of future results and this "Sell in May and go away" strategy does not work every year. Further, this anomoly isn't 'statistically significant' or it's supposed pattern isn't anything that can't be explained by pure chance.

But, back to the May just passed. It wasn't pretty. The S&P 500 index dropped 8.2% for the month making it the worst May performance since May 1962, according to CNBC. Rising tensions in the Korean peninsula, European debt worries, China's property bubble bursting, and the winding down of America's "stimulated" economy conspired to send investors to the sidelines, according to The Economist.

Not too surprisingly, as equity prices declined in May, government bond prices rose, according to Associated Press. This "flight to safety" suggested that diversification between equity and government bonds worked in May.

While you may "go away" this summer for some rest and relaxation, be assured that we will remain hard at work on your behalf.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable or not available.

OVER THE PAST FEW MONTHS, we've endured an uncontrollable oil spill in the Gulf, a volcano in Iceland that disrupted air travel in Europe, and an earthquake in Haiti that caused immeasurable suffering. These human disasters have parallels in the financial world that are worth noting.

The ongoing gusher in the Gulf is a manmade disaster that, in the financial world, looks like our country's ongoing manmade gusher of deficit spending. With the fragile Gulf ecosystem drowning in oil, our country is drowning in bills that will eventually come due. Efforts to stop the oil spill have so far failed as have our efforts at reducing our deficits. BP says drilling a relief well is the "end game" to stop the leak. What is our country's endgame to stop the ballooning fiscal mess?

The volcano in Iceland disrupted air travel for millions of travelers causing birthdays and weddings to be missed, business meetings to be cancelled, and a few extra days of unexpected expenses. But, eventually, the ash cleared and travelers went on their way. Likewise, the financial markets experience disruptions from time to time that are disappointing to investors. We call these "corrections" and they are usually temporary and not "retirement threatening." They're no fun, but we get through them.

The earthquake in Haiti came without warning and was devastating. More than 200,000 people likely died and many more will feel its effects for years to come. Poor infrastructure and lack of planning exacerbated the devastation of the quake. Likewise, the economic crisis of 2008-2009 is the financial market equivalent of the Haiti earthquake. Our country's inability to live within its means (poor infrastructure) and prepare for contingencies (poor planning) led us to a market debacle. Like Haiti surviving its calamitous quake, we can survive a market meltdown, and, ideally, learn from it so we are better prepared to withstand the next financial earthquake.

This comparison of nature's disasters to a financial counterpart is not meant to trivialize the pain from the Gulf, the volcano, and the earthquake. Rather, it suggests that we can become better investors by learning the lessons that nature teaches us. The question is, will we take nature's lessons to heart?
Best regards,

Kevin Kroskey

May 24, 2010 Weekly Commentary

The Markets

The U.S. stock market just entered its first correction of 10% since the March 2009 bear market low, according to Barron's magazine. In the paraphrased words of economist Michael Darda as reported by Barron's, are we experiencing an aftershock of the 2008 market crisis or are we having a relapse?

Catalysts for this recent correction are varied. China is clamping down on its easy money policy. Several European countries are in the midst of a liquidity/solvency problem. In the U.S., jobless claims unexpectedly rose last week and the Conference Board reported a surprising drop in its index of leading economic indicators. Both reports raised concerns that the economic rebound in the U.S. may be losing some strength, according to Bloomberg.

The case for optimism is also in plain sight. U.S. News and World Report says two new surveys out last week suggest, "We might be on the verge of experiencing the Great Shopping Comeback of 2010." Higher consumer spending could propel the economy and create jobs. In corporate America, first quarter earnings for the S&P 500 companies grew 55% from a year earlier and 77% of them beat their Wall Street estimate, according to Bloomberg. And, according to Federal Reserve Bank of New York President William Dudley as reported by Bloomberg, "The U.S. economy is recovering and we are now seeing the first signs of significant employment growth."

Economist Darda answered his own question and said we're simply having an aftershock, not a relapse. Even if he turns out to be correct, aftershocks could still generate some "scary headlines" in the near future. As always, we do our best to stay on top of these types of evolving situations.

Notes: S&;P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable or not available.

"History provides a crucial insight regarding market crises: They are inevitable, painful, and ultimately surmountable." --Shelby M.C. Davis, legendary investor

It's been said that we can count on death and taxes. We should also add "market crises" to the list. It seems like the market is always either in a crisis, recovering from a crisis, or anticipating the next crisis. According to a January 2010 Morningstar article, we've experienced numerous "crises" over the past four decades including the following:

In the 1970s, we had stagflation, oil shocks, high inflation, and a stock market that dropped 44% in 2 years.
In the 1980s, we had the collapse of Drexel Burnham Lambert and the stock market crash of October 1987, which sent the Dow Jones Industrial Average down more than 20% in one day.
In the 1990s, we had the savings and loan crisis, the bailout of hedge fund Long Term Capital Management, and the Asian financial crisis.
In the 2000s, we had two bear markets, the subprime mortgage meltdown, and the financial crisis of 2008-2009.

But, guess what? Despite these market crises, the Dow Jones Industrial Average rose from 800 at the beginning of 1970 to 10,193 at the end of last week, according to data from Yahoo! Finance. That's nearly a 13-fold increase.

It's easy for investors to let the events of the day or the "crisis du jour" cloud their thinking. However, successful investors take a wider view and realize that crises happen, crises get resolved, and while they can sometime be scary, they should not lead you to panic mode.

Weekly Focus – Think About It
"Close scrutiny will show that most 'crisis situations' are opportunities to either advance or stay where you are." --Maxwell Maltz

Best regards,

Kevin Kroskey

May 17, 2010 Weekly Commentary

The Markets

"Hot potato" is a favorite children's game. Unfortunately, as adults, we're playing an economic version that has the potential for much more serious consequences.

It started with consumers going into debt over their heads to help fund an ever-increasing lifestyle.

For example, total household debt rose from $1.1 trillion in 1978 to $13.5 trillion at the end of 2009, according to the Federal Reserve. That's more than a 12-fold increase over the past 31 years. By contrast, our economy, as measured by gross domestic product, grew from $5.3 trillion to $13.3 trillion during that same period--a more modest 2.5-fold increase, according to the Department of Commerce.

Then it moved to the financial sector racking up huge liabilities on the back of newfangled derivative securities.

Total financial sector debt, which includes various government-related enterprises and private financial institutions, rose from $0.4 trillion in 1978 to $15.6 trillion at the end of 2009, according to the Federal Reserve. That's a 39-fold increase over the past 31 years. With this high leverage, is it any surprise that our banking system nearly went kaput in 2008?

Then it moved to the local, state, and federal governments incurring unsustainable debt to keep the world economy from collapsing.

Total U.S. local, state, and federal governmental debt rose by a factor of 11 from 1978 to 2009, according to the Federal Reserve. Overseas, the picture looks bleak, too, as many of the European Union countries are sitting on huge piles of IOUs that look increasingly less likely to be paid back in full. Not surprisingly, gold prices hit a record high last week as people turn to the perceived safety of the yellow metal in times of doubt, according to the Financial Times.

With the potato of debt having passed from party to party over the past three decades, the financial markets are now saying the potato stops here. As John Mauldin, president of Millennium Wave Advisors, LLC, says, "You don't cure a debt problem with more debt unless you have a clear path to grow your way out of the debt." In the U.S., we can grow through population growth and productivity gains. That, coupled with higher taxes and lower spending, may do the trick. In Europe, structural headwinds make the growth story much more difficult and that's partly why the value of the euro is declining and street protests are rising.

How this unwinding of debt plays out with the world populace will likely affect the financial markets for years to come.

Source: Bureau of Labor Statistics

The fact that the most highly educated people in our population have a relatively low unemployment rate of 4.9% may help explain why consumer spending hit an all-time high in March, according to MarketWatch. People with a higher education tend to earn more and since 95% of that demographic is employed, that has helped reinvigorate consumer spending.

The overall unemployment rate of 9.9% is unacceptably high and understandably grabs the headlines, but looking at the composition of that number suggests the damage to the economy might not be as bad as first thought. Digging beneath the headlines like this helps us make better assessments of the current economic and investing environment.

Weekly Focus – Think About It
It's a shallow life that doesn't give a person a few scars."
--Garrison Keillor

Best regards,

Kevin Kroskey

May 10, 2010 Weekly Commentary

The Markets

Five little "PIIGS" went for a boat ride. The weather turned very stormy and "G" got tossed overboard without a life jacket. Shortly thereafter, "P" and "S" found themselves overboard and drowning in the water, too. Unable to mount an effective rescue, the other shipmates radioed for help. Fortunately, "EU" and "IMF" were available with a bigger boat and more rescue equipment. As the storm continued to rage, the "PIIGS" desperately waited for "EU" and "IMF" to arrive, hoping they would have the tools necessary to save them.

The above metaphorically describes what is happening in Europe. The "PIIGS" are Portugal, Italy, Ireland, Greece, and Spain. Water is code for government debt and largesse. "EU" is the European Union and "IMF" is the International Monetary Fund. The big question is, will the "EU" and the "IMF's" boat and tools be enough to complete the rescue, or will they be overwhelmed by the storm, too?

With the events of last week, world financial markets declared loud and clear that government debt levels in certain countries are unsustainable and have to be dealt with right now. Jolted into action by the gathering storm, the 16 euro nations and the IMF announced late Sunday evening a loan package worth nearly $1 trillion to help stem the budding crisis, according to Bloomberg. This huge show of force may be enough to convince investors that the euro nations are serious about saving the weaker members, i.e., the "PIIGS."

The good news is that the U.S. is not the epicenter of this latest problem. That, coupled with an improving economy, may help the U.S. avoid the brunt of the pain.

THE EVENTS OF LAST WEEK REMINDED INVESTORS that a significant drop in the markets can happen at any time. However, as described below, the U.S. has some positive momentum in place that may help it weather a new storm should one arise.

First quarter corporate earnings were strong as 76% of the S&P 500 companies beat the average analyst profit forecast, according to Bloomberg. Strong earnings growth may provide support for stock prices.
U.S. consumer spending hit an all-time high in March, finally surpassing the previous peak set in November 2007, according to the Commerce Department. Consumer spending accounts for 70% of gross domestic product so this could bode well for economic growth, according to Forbes.
Job growth is finally occurring as the Department of Labor said nonfarm payroll employment grew by 290,000 in April, which was well above forecast. Earlier months were revised upward, too. Employment growth is a key driver of economic growth.
Consumer borrowing posted an unexpected rise in March, which was only the second gain in 14 months, according to Associated Press. The rise may suggest consumers are feeling more confident and that could help the economy.

Today, the economy is on its way up from a devastating decline. With the layoffs in the past couple years, significant excess in the economy has been wrung out, which may set the stage for sustainable growth. As described above, many key economic indicators are pointing toward a strengthening economy. And, while it's true that the economy and the stock market can fall out of sync for periods of time, the fact that our economy seems to be heading in the right direction may help provide some underlying support for the stock market in the short term.

Weekly Focus – Think About It
"Worry gives a small thing a big shadow."
-- Swedish Proverb

Best regards,

Kevin Kroskey, CFP, MBA

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* This newsletter was prepared by PEAK.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Past performance does not guarantee future results.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.

May 3, 2010 Weekly Commentary

The Markets

Two tragedies, worlds apart, reached a boil last week and affected the financial markets in a not so pleasant way.

Greece, which is an ocean away and no stranger to tragedy, (think Aeschylus, Sophocles, and Euripides), nearly imploded last week on fears that its government was bankrupt. With huge budget deficits and no credible way to pay them, Greece saw its short-term government bond yields soar past 20%, according to Barron's. By contrast, the comparable bond in the U.S. yielded about 1% last week, according to the Treasury Department. As a euro country, Greece has limited tools to deal with the crisis on its own (e.g., it cannot devalue its currency or adjust its interest rates) so it has to rely on the kindness of neighbors to bail it out. This past weekend, the European Union and the International Monetary Fund announced that they will support Greece with a $146 billion multi-year aid package, according to Bloomberg. Now comes the hard part for Greece--implementing the austerity measures that accompany the bailout.

The concern that this debt problem could spread and undermine the euro countries helped undercut many world stock markets last week.

Closer to home, the uncapped oil leak in the Gulf of Mexico has states bordering the Gulf bracing for an environmental and economic disaster. The Gulf is a major oil-producing region and this spill could deter new drilling, a thought which helped send oil prices up more than 1% last week. Unfortunately, fishermen, the tourism industry, and the environment itself all stand to lose, too, as the spill worsens.

While the twin tragedies captured many of the headlines last week, much of the economic news was bullish. For example, first quarter gross domestic product grew at a respectable 3.2 percent annual rate, household spending increased at the fastest rate in three years, and The Institute for Supply Management-Chicago Inc. said its business barometer rose to 63.8 in April, the highest level in five years, according to Barron's. On top of that, The Economist magazine said, "global output is now back to where it was before the downturn…(and) there is growing optimism that the recovery is becoming self-sustaining."

Although the twin tragedies are still developing, recent solid economic news has helped limit their financial market impact.

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable or not available.

"EVEN AFTER THE BIGGEST RALLY SINCE THE 1930s, U.S. stocks remain the cheapest in two decades as the economy improves," according to an April 26 Bloomberg story. How can that be? Well, digging into the numbers a bit, it appears the statement comes with some qualifiers. First, the "cheapness" is based on the price to earnings ratio (P/E) using forecasted earnings estimates. By that measure, the S&P 500 is trading at 14.1 times forecasted earnings. As you know, forecasts may or may not come true so, if earnings actually fall short of the projection, then today's P/E will be higher in retrospect.

Second, while the Bloomberg headline said stocks were the cheapest since 1990 based on analyst estimates, the article qualified that and said, "except for the months after Lehman Brothers Holdings Inc. collapsed." So, yes, stocks may be cheap now, but they have been cheaper in the recent past.

But wait, in the same article, Bloomberg points to another market valuation measure that says the market is significantly overvalued. Using the 10-year average corporate earnings model popularized by Yale economist Robert J. Shiller, the P/E on the S&P 500 is currently about 22, which is well above the historical average of 16.

Bulls will point to the P/E using forecasted earnings estimates and say stocks are cheap. Bears will point to the Shiller calculation and say stocks are not. Regardless of which view is ultimately correct, stay focused on your goals and your objectives for the future.

Best regards,

Kevin Kroskey