Why is the Market at All-Time Highs

Welcome to the Schmoozeletter Blog. Your source for weekly water cooler wisecracks from the world of finance. If you have an opinion different than mine or a topic you want to hear about, let me know!

This week, we’re talking about:

Why is the Market at All-Time Highs?

Isn’t doom and gloom in the air?

Why is the market at all-time highs?

Is it:

A) Peace in the Middle East

B) A new economic policy of the president

C) A technical golden cross over resistance

D) Tesla missing expectations on quarterly earnings

Scroll below to find out:

Why is the Market at All Time Highs?

The answer is:

Drumroll…

D) Tesla quarterly earnings.

Bet you didn’t see that coming.

But it’s true!

The reason the market goes up really comes down to what “the market” is:

It is just a collection of mostly profitable businesses.

It is not just TSLA, but about 500 companies in aggregate.

And in aggregate, they are growing their earnings.

The “trailing PE” is higher than the “forward PE.” This means, as a whole, the market is growing its earnings over the next year.

Because they keep growing, the market keeps going up.

Around 10% per year over the long term.

Because the market goes up, it is going to be at all-time highs a lot.

But that is boring!

It is way more fun to say it’s because of a crazy headline or some politician you personally agree with!

It is even more fun to say the market is going down.

Headline:

MARKET CRASH! EVERYONE IN RUINS!

Would sure sell a lot of Schmoozeletters.

But companies, as a whole, are growing earnings over time, so the market goes up over time.

Now that you know this fact, you are smarter than 90% of the blowhards you see on CNBC.

Final Thought

“My advice...could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.” – Warren Buffet