The S&P 500 hits another all time high today (July 11th). Mathematically speaking, all time highs in the stock market shouldn’t be a big deal. If you live in a world where inflation constantly increases the numeric prices of real assets, then you could theoretically be hitting new stock market highs all the time. By itself, a stock market high doesn’t mean peace and prosperity for all.
In this case, however, a little well earned cautious optimism is merited at least for US investors. A positive US labor market report was posted last week and corporate earnings reporting continues to come out strongly. The stock market recovery does not universally apply everywhere in the western world. More specifically, it looks like the forthcoming financial headaches for Britain and the financial sectors of Europe look to be relatively contained at the moment. On the plus side, political fallout from the Brexit has fewer uncertainties as Theresa May becomes the sole remaining candidate for UK Prime Minister. The stock market climb is based on business strength, and it is happening despite the hyperbolic headlines. The focus on the underlying fundamentals is encouraging to us as long term investors.