Unfortunately, from my perspective, both are completely rational, plausible, and probably accurate. Which means that I have no earthly idea how this is going to play out. One thing I do agree with this author about is there is not going to be a giant market drop anytime soon. Those things come along about once every 65-75 years which means most of us will be dead before the next one.
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Jun. 8, 2014 1:01 AM ET
• The SPY is not rising out of control and there is a lot of data to prove it.
• As of May 2014, the Domestic Market Capitalization of the main U.S. Exchanges was $24.9 trillion, not that drastically higher than the 2007 and 2008 time period.
• For ETFs like SPY, there will continue to be allocations away from other smaller capitalization companies to companies indexed by the SPY ETF.
For the last few months, the amount of articles published about the “impending market meltdown” has gotten a bit excessive after considering the contributors’ conclusions and how they reached them (using some sort of data set with no actual triangulation of ideas). So here is my shot at this topical obsession.
Just a general note, my position on the markets is that market levels are just not that out of the ordinary. I strongly believe that market levels are warranted and I have the data to back it up. This article will mainly cover the objectivity of a sound SPY investment and how investors should not be too worried about ridiculously volatile changes in the market (there will not be another giant market drop anytime soon).
Instrument of Choice: SPDR S&P 500 (SPY)
The SPY seeks to provide investment results that, before expenses, generally correspond to the price and yield performance of the S&P 500 Index. The Trust holds the portfolio and cash and is not actively managed. To maintain the correspondence between the composition and weightings of portfolio securities and component stocks of the S&P 500 Index, the Trustee adjusts the portfolio from time to time to conform to periodic changes in the identity and/or relative weightings of Index Securities.
Below is a summary of indices, comparing the S&P 500 index to the rest of the major indices. It’s fairly easy to point out that SPY is not narrow enough to be classified as a “narrow” indicator and not broad enough to be a “broad” indicator (I consider the Russell 2000 a broad index), so this will need to be kept in mind throughout the remainder of the article. Overall, the SPY has captured a significant portion of the 2013 to 2014 price rises and that may be a direct link to market confidence; however, this is a premature conclusion and will need more than just loaded statements to defend my position on the market (that a market crash is not coming anytime soon and current levels are not that out of the ordinary).