Stock market high, economy low; Does it matter?

LEXINGTON, Ky. (WKYT) – Historically the stock market and the economy have moved in the same direction. When the economy is doing well the stock market is rising. When things bottom out in the economy, the stock market typically follows suit. Right now the market is near all-time highs while the United States is struggling through a recession. Retirement planning fiduciary advisor Josh Smith of Strategic Wealth Designers says something has to give soon.

© Provided by Lexington WKYT In this Nov. 23, 2020 file photo, a street sign is displayed at the New York Stock Exchange in New York.

“All-time high has been a headline that we keep hearing over and over for the past 5-10 years,” Smith says. “Younger investors may be thinking that the market just goes up and that’s all it ever does. Those who have been investing for a long time will remember 1966-1982 where there was no growth in the market at all. Put your dollar in the market and 16 years later all you had is that 1 dollar still. We are walking a very slippery slope right now with stocks and their valuations.”

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The Wall Street Journal recently wrote a story saying that the economy will take at least 10 years to recover from the fallout of the coronavirus and all that was lost during the pandemic. The stock market has seemingly blown past the record job loss numbers, the lack of money being spent in the economy, and the rising coronavirus death toll numbers that currently stand at their own all-time highs. Smith says the market is trading on hope and hope isn’t a sound investment strategy.

“The market is pricing in a vaccine cure-all situation where everything goes back to normal overnight and growth explodes again,” Smith says. “That just doesn’t seem realistic to me. You have about half the population who won’t take the vaccine, we don’t know how long the vaccine will be effective for and we have businesses who take time to rebuild. The stock market could very well pull off those highs that we have been seeing, especially over the winter months as the virus cases are expected to continue to skyrocket. My advice would be to proceed with caution and don’t look at the stock market as an investment that will continually go up. Positioning some of your assets with safety nets around them would be a wise consideration for most investors.”

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