Recent weeks have shown that volatility is back in the market. The stock market has kept chugging along on one of the longest bull market runs in history and during this period investors have been winners regardless of what equity strategy they have employed. As markets experience roller coaster weeks it is important to reexamine your investment strategy to ensure you are positioned to take advantage of not only the current market environment but also the predicted future climate.
So Where Are We Now?
The S&P 500 has achieved and even eclipsed long-term valuation averages as price growth during this bull run have caught up with projected earnings numbers. Analyst projections predict that the stock price for the S&P 500 is fairly valued if not slightly overvalued as a whole as the current Forward PEG of 1.43* (as of 09/30/14) is just a hair above of the 15-year average Forward PEG of 1.41*. Essentially these figures are used to determine the anticipated profit per dollar invested and unlike many financial figures, lower is better.
How Should We Invest Looking Forward?
How can you make money in a stock market that is fairly priced? You must employ a strategy that is positioned to take advantage of undervalued opportunities, while maintaining a material allocation to each sector and a broadly balanced diversified portfolio overall.
*Forward PEG estimates are based on analyst projections from Capital IQ