So far, 2013 has been quite an impressive year for the markets, particularly for the U.S. Stock Market with returns over 25% year to date. What is interesting is that we are starting to see many articles from people who believe that the stock market is in bubble territory. It is understandable to some degree given the experiences we have had in the last decade with very large drops in the market, but as most of you know, our investment philosophy at JPH Advisory is based on valuation. If we look at valuation (see charts below) we can certainly see that the markets are full value, but as a whole, we do not see them as overvalued.

Valuation for the S&P 500, Next Twelve Months Price-to-Earnings
Valuation for the S&P 500, Last Twelve Months Price-to-Book-Value
Sources: GoldmanSachs


Looking at the charts above, we can see that we are just getting back to “normalized” valuations. However, this does not mean we will not see a correction and as I have mentioned before, corrections can happen for any given reason OR for no reason at all. As always, there are many reasons why the market could go down, but being in a bubble is not one of them.

Jon Houk, CFP®