Stocks are back at record highs.
On Tuesday, both the S&P 500 and the Nasdaq hit new intraday and record closing highs. The Dow, meanwhile, got within about 60 points of the still-elusive 20,000 barrier before closing at 19,912.
The S&P 500 on Tuesday closed at a fresh record of 2,280.07. The Nasdaq closed a 5,600.96.
On Wednesday, stocks won’t have much in the way of economic data to contend with, as the weekly report on mortgage applications and the November reading on home prices from the FHFA will be the only news to work through.
Earnings, however, will provide plenty for investors to digest on an individual stock basis, with the highlights for Wednesday including results from Boeing (BA), AT&T (T), eBay (EBAY), and Qualcomm (QCOM).
After Donald Trump was elected president, stocks went into rally mode on hopes that his plans for cutting corporate taxes and his broader business-friendly approach would boost earnings and economic growth.
For the last month, however, stocks had been roughly unchanged and some strategists had begun to see signs of things being “unsettled” in conversations with clients. Tuesday, however, was one of the more decisive days — at least for stocks — that we’ve seen in some time.
So, is the market at risk now of getting, once again, too far ahead of itself?
“The market is not expensive at [17 times forward earnings],” wrote RBC strategist Jonathan Golub in a note over the weekend.
“In March 2014, we published ‘P/Es to 17.0x,’ calling for further upside to multiples as the spread between rates and valuations renormalized,” Golub added. “At that time, forward P/Es stood at 15.4x. With P/Es currently at 17x, investor angst over valuations is once again on the rise. Just as in 2014, we expect multiples to continue their drift higher.” (Emphasis added.)
There may be policy uncertainty surrounding investors today, but the long-running worry about stocks being “too expensive” — even as interest rates appear set to rise in the coming months — should not be a reason to bail on the market.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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