Too often when we have a short-term downturn in the stock market - it's too late to offer up information that might have been helpful ahead of time.
This week's edition of "how low can stocks go" goes as follows... re the Dow, S&P 500 & Nasdaq stand against their all-time high levels:
DOW: New high
S&P 500: New high
Nasdaq: New high
What a year and what a ride it's been for stocks so far...
The Trump bump.
Lower regulation.
Record earnings.
Low inflation.
New highs set with regularity.
All of this without even getting healthcare or tax reform (yet). All of this might be enough to make you nervous, but consider this: fundamentals are still performing better that stock prices. In other words, there's less risk in the stock market today than on Jan. 1.
The Dow is up 14.1 percent in 2017, the S&P 500 is up 13 percent & the Nasdaq has been the biggest winner up by 21percent.
As far as how low stocks could go...If only market fundamentals mattered here's what we'd want to consider with regard to the S&P 500 for example.
S&P 500 P\E: 25.22
S&P 500 avg. P\E: 15.67
The downside risk is 38 percent based on earnings multiples right now from current levels. That's about 2 percent less risk than entering 2017 despite stocks having appreciated so significantly this year already.
2017 is proving the power of improved earnings.
With the super-strong growth year over year, stock prices are meaningfully higher as compared to the start of 2017, yet risk has actually declined because fundamentals have improved faster than prices have risen.
Now, as always, I don't expect that type of selloff to occur (38 percent) but it's always important to ensure that you're positioned for negative adversity.
If a short-term decline at the aforementioned levels wouldn't affect your day-to-day life, you're likely well positioned to continue to take advantage of investment opportunities.
If that size of selloff would rock your world over the short-term, that's when you should probably seek professional assistance in crafting your plan (that balances your short-term needs with long-term objectives).