Less than two weeks before the 1929 stock market crash, Irving Fisher, a U.S. economist, famously declared stocks had reached a “permanently high plateau.” In retrospect, it was super bad timing. 

Fast forward to now: U.S. stocks are trading near all-time highs and are on pace to record their tenth consecutive yearly gain. While it’s been an impressive multi-year run, are the stock market’s best days behind it?

Let’s examine four reasons why the upward trend in stocks may continue, at least through the end of this year.

Corporate Earnings


Thus far, 91 percent of companies within the S&P 500 have reported second-quarter earnings and the results have been very strong. The earnings growth rate for the S&P 500 during the second quarter jumped 24.6 percent from 20 percent back on June 30, according to FactSet.

While there have been scattered misses on second-quarter earnings, the overall trend has been up. And unless corporate earnings start to decelerate or fall, the latest results do not paint a bearish scenario for stocks.

Price Momentum

What about the price velocity of stocks? Is it up or down? One yardstick is the iShares MSCI USA Momentum Factor ETF (MTUM). The fund owns mid- and large-cap stocks that have appreciated in value over the past six and 12 months.

MTUM has outperformed the total U.S. stock market year-to-date with a gain of 9.8 percent versus a 6.9 percent rise in the Vanguard Total Stock Market ETF (VTI). Moreover, MTUM trades well above its 200-day moving average, which is another sign that U.S. stock prices among the performance leaders are still on the rise.

Sector Momentum

If the stock market is on the verge of an imminent crash, shouldn’t warning signs among key industry sectors be evident? 

Among the 10 industry sectors within the S&P 500, seven are ahead this year. And standouts like the Consumer Discretionary Select Sector SPDR Fund (XLY), Healthcare Select Sector SPDR Fund (XLV) and Technology Select Sector SPDR Fund (XLK) have beaten the broader U.S. market by a significant margin.  

The only three S&P 500 sectors with negative year-to-date performance are the Consumer Staples Select Sector SPDR Fund (XLP), Industrial Select Sector SPDR Fund (XLI) and Materials Select Sector SPDR Fund (XLB). Bad as that may seem, the declines in lagging sectors have been modest, thereby muting the impact on the overall U.S. stock market.

Market Sentiment

Could the stock market’s mood or sentiment be a sign that trouble is brewing? And if stock prices are over-inflated to the point of a looming pop, this should be reflected by overly bullish extremes. What do the indicators say?

Instead of showing a reading of “extreme greed,” the CNN Fear & Greed Index’s current reading of 55 is essentially neutral. A reading near zero indicates “extreme fear” whereas anything near 100 signals “extreme greed.” CNN’s indicator is a composite of seven different factors, including stock market breadth, safe haven demand and market volatility. Based upon current levels, stock prices do not reflect bullish extremes.

Summary

The longer it has been since the stock market’s last bear market, the sooner the next one will be. But until then, the indictors clearly say the bullish trend in stocks isn’t over. Or as Mark Twain might say, “Reports of the stock market’s death have been greatly exaggerated.” 

Ron DeLegge is founder and chief portfolio strategist at ETFguide.