Tags: WSJ | Clements | Stocks | Cheaper

WSJ's Clements Wishes Stocks Were Cheaper

By    |   Monday, 17 November 2014 05:07 PM

The stock market's ascension to new highs in recent weeks is great news for those of us who are fully invested. 

But for those investors hoping to buy stocks at reasonable prices, the view isn't so pretty, notes Wall Street Journal columnist Jonathan Clements.

"My hope: we get a 25 percent decline in share prices," he writes. "That would make the market more reasonably valued and provide a buffer against disappointment. I’d have greater confidence that my next stock-market purchase would collect a decent long-run return."

A 25 percent drop for the S&P 500 index from Monday's close at 2041.32 would put it at 1,531. The index hit a record 2,046.18 Thursday.

"There are three reasons to fear slower earnings growth over the next 10 years," Clements says. 

"First, the recent gains have been driven by rising profit margins. . . . Second, economic growth may disappoint. . . . Third, over the past 10 years, companies have bought back as much stock as they’ve issued."

One area of the market where investors appear particularly bullish is consumer discretionary stocks. The S&P 500 Consumer Discretionary index has returned 1.7 percent so far this month, compared to 1.2 percent for the S&P 500 overall.

"Consumer discretionary is a good way to play the health of the U.S. economy, especially when you look overseas," Margie Patel, a fund manager at Wells Fargo Asset Management, told the Financial Times. "A lot of the companies are U.S.-focused in their revenues."

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The stock market's ascension to new highs in recent weeks is great news for those of us who are fully invested. But for those investors hoping to buy stocks at reasonable prices, the view isn't so pretty, notes Wall Street Journal columnist Jonathan Clements.
WSJ, Clements, Stocks, Cheaper
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2014-07-17
Monday, 17 November 2014 05:07 PM
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