What’s Really Going on in the Stock Market?

What’s Really Going on in the Stock Market?

I’m generally not big on posting articles about “What’s going on in the market?” But today, August 13th, marks the 40th anniversary of the infamous “The Death of Equities” article by business week. It came out, originally, just in time to usher in one of the great bull markets in our country’s history.

I’ll get to some data on the current market environment, but before I do there are some amazing (surprising for some people?) observations about what’s happened since that article was published 40 years ago today.

In 1979, the S&P stood at 107.94[1] – today, as I write this, the S&P stands at 2,929. For those that are counting, that’s 27x higher, not including dividends.

Speaking of dividends, the dividend in 1979 was $5.97[1]. Last year, the dividend for the S&P was up to $53.61[1]. That’s almost 9x higher.

All the while, the consumer price index (inflation) is up just 3.5x.

Additionally, U.S. real (adjusted for inflation) GDP is up from about $7 trillion to about $19 trillion (in 2012 dollars).


I don’t know how else to say this, but my job as I see it, for both my clients and readers of my blog in this case, is to be a voice of reason. A voice of sanity and calm through regular storms of negativity. I find it rather interesting that as well as the market has performed over the past decade – albeit from a generational low – the media at large has maintained its schizophrenic viewpoints.

Given how easy it is to find overly pessimistic viewpoints, I thought I’d share some alternative – more positive – perspectives all grounded in data that are a bit harder to find via the traditional media outlets. This data comes from sources that I believe to be overly reliable.

I’m well aware that anyone can make data say anything you want, but my hope is that you may find this to be as independent as possible as I have nothing to sell here other than a long-term optimistic view of the markets which, based on history, is the only viewpoint that squares with overall stock market history.

One disclosure: I certainly realize and accept the fact that the markets can change in an instant and am not claiming that the market can only go up from here. I have no idea – but if it’s any comfort, neither does anyone else. I just seek to present data that you are unlikely to see in a world that sells only the apocalypse du jour.

A More Current Picture:

Last week, the media started to discuss the market meltdown as the beginning of the end as we know it. To me, TV doesn’t get any better than when everyone confidently explains THE reason the market is selling off – while just one week prior, they were discussing how much more room the market has to run.

Narrative aside, what is the data saying about the current state of affairs? Let’s get to it.

Household Incomes

Real (adjusted for inflation) median household income is at a multi-decade high.

This is the “Scary” Debt Story You’ll Hear

I hadn’t planned on including a contra-post, but I came across this chart this morning. As you can see below, the title of the graphic is, “Total U.S. consumer debt hits levels higher than 2008” as if that is indicative of a similar coming meltdown.[2] In fact, that’s the exact implication in the link with the first sentence being, “Consumer debt is growing to worrisome levels.”

But this is where the comparison ends. Here is some additional context that was conveniently not mentioned…

Household Debt Servicing

Back in 2008, the percentage outlay of disposable income being paid toward servicing the above debt level reached a multi-decade high. Fast forward to today, we sit at a 40+ year low. The consumer is healthier financially with regard to debt than they have been in decades.

Household Net Worth

Along those same lines, household net worth (assets minus liabilities) is at or near its all-time high and has been steadily climbing into new-high territory since ~2012.


Unemployment is at a near 50-Year Low at 3.7%.

But this doesn’t tell the whole story either.

There Are More Jobs Than People Looking for Jobs

With unemployment so low, there are literally more jobs available than there are people looking for them. Might I add, this occurred for the first time ever in our country’s history in 2018. According to the graph below from the Bureau of Labor Statistics, there are approximately 0.8 unemployed for every one job opening as of May 2019:

The Market is Fairly Valued

The current forward Price/Earnings Ratio is 16.95x with a 25 year average of 16.19x. Seems right on par to me…

Dividend Yield > 10-Year U.S. Treasury

With the yield of the S&P exceeding the yield on 10-Year Treasuries, you are now getting paid more to hold stocks than 10-Year Treasuries and you get the potential growth for free. Kind of mind-boggling to me.

Net Exporter of Energy

This one isn’t totally stock market related, but it was so unexpected just a couple of decades ago, I feel compelled to include it. Starting next year, we are on pace to be a net exporter of energy. When I was in college in 2001, I remember my world geography professor saying we were on pace to run out of oil in 2025. Yes, in 2025. We could not have seen this coming. Safe to say the world has changed, and I’ll bet it will keep changing.

I could honestly go on and on, but I won’t. Long story short, the media loves to talk about the end of the world as we know it, but when you step back and look at the big picture, things are looking pretty darn good.

For the record, there are ALWAYS plenty of reasons to be pessimistic and now is no exception. Political unrest, tariffs, government debt, the Fed, and plenty more. And again, I am NOT saying the market will only continue to march north, I just don’t see the “everything bubble” that so many want to discuss anywhere in the data.

In closing, regardless of your opinion about what’s going on or where it goes from here in the short-term, consider one question:

  • “Do you think a basket of ~$24 trillion worth of 505 of the best capitalized, most innovative and transparent companies in the world will be worth more or less in 5, 10, 20 or 30 years (the length of the average retirement)?”

As Mr. Market has demonstrated ever since Benjamin Graham created that concept, short-term prices are a distraction.

Focus on the big picture.

Related Reading:

A Portfolio Strategy for 30-Year Retirements

Disclosure: This article is not advice, please see additional disclaimers.

[1] Data from NYU Stern School of Business

[2] We could be heading for a recession, but it seems unlikely it would be due to overwhelming consumer debt.

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