On Friday, the S&P 500 was up 0.4% and Toronto was up 0.7%.
With this latest gain, North America stock market indexes are at record highs. That does not mean that stocks are necessarily over valued, but it should be taken as a sign to be somewhat cautious. Stock investors should always be prepared to weather (and hopefully take advantage of) market declines. In my view, the S&P 500 does look to be overvalued given that it is trading at about 23 times trailing earnings. Even with today’s very low interest rates that is expensive unless it is viewed that interest rates will not rise.
I certainly invest much more on a stock-by-stock basis than based on overall market values. Still, I feel inclined to have some cash available and to not be fully invested at this time. At last check, my cash position was about 20% and I am inclined to try to maintain or increase that percentage. However, it is difficult to identify anything in my accounts that I would like to sell or reduce. I do have an order in the sell a small portion of my Boston Pizza if it hits $23.50 and a small portion of my Toll Brothers if that hits $35.
Stocks that rose on Friday include CRH Medical up 3.9% in U.S. trading and up 26% this year to date (highest on our list). Couche-Tard up 2.7%. I had hoped this would dip to $58 as I had an order in to add at that level.
All in all, the markets have generally been kind to people in the first 6 weeks of 2017. But we should always be prepared for the opposite, at least temporarily. The difficulty, of course, is that the periods of decline are unpredictable and living through them tends to be the price we pay for enjoying the rising trend in the long term.