Your money’s in danger if you get carried away by soaring market numbers

The stock market has had quite a run this year. That should make you nervous.

Maybe it’s because of the Trump bump, the continuing allure of tech stocks (even those not making money) or the low-interest-rate environment that has people throwing money at the market because returns elsewhere are so puny, or all of the above and a few more.

Whatever the drivers, the performance numbers sure look good.

The Dow 30 is up more than 8 percent over the last six months (calculations are as of mid-week, using data from Yahoo Finance). The S&P 500 is up about the same. The Nasdaq Composite, having taken 13 years to recoup its dot-com-bust losses, has charged well beyond that; it’s up 12 percent just since mid January. The Russell 2000 (remember those guys?) is about 4 percent higher.

So what’s not to like about this?

A lot, but first let’s take a gander at how local stocks have done in the midst of this frenetic run.

We’ll start really locally, but unfortunately that’s not a long list. Tacoma and Pierce County have always been a bit thin on locally headquartered, publicly traded companies, to its long-run economic detriment, with mergers and moves lopping names such as Puget Sound Bank (the original) and Hillhaven off the list.

As of now we’ve got just two.

Columbia Bank has not shared in the stock market’s run; it’s down nearly 11 percent from the start of the year. It’s not that the bank itself has done anything wrong. In fact, its most recently quarterly earnings were a record (coupled with near-record-low problem loans), it’s proceeding with yet another regional acquisition (Pacific Continental in Eugene) and has had to deal with the sudden loss of its chief executive, Melanie Dressel, and the naming of a new CEO.

Why hasn’t the market rewarded that performance? It could be that investors don’t like banks generally, or see flashier opportunities elsewhere, or wanted to see how the selection of a CEO successor worked out. (Since the bank stayed at home to find one, that would suggest there won’t be a dramatic change in strategy or operating philosophy.)

The other local is TrueBlue, which is up more than 6 percent since the start of the year, and was up even more earlier this year. This is despite of a drop in revenue and net income in the first quarter from a year ago, the result of a “reduction in the scope of services provided to our former largest customer.” Perhaps investors are betting that the long-term demand for temporary help and staffing services will outweigh dips on business from some customers.

All right, time to hit the road and see what’s going on with stocks of companies based up north, starting with Amazon.

By now people have heard that when Amazon announced a deal to buy Whole Foods, its market value went up by more than the purchase price (although it should be noted this is an all-cash deal, not a stock swap).

The stock is up by 33 percent this year, and currently tops $1,000. That renders a price-earnings ratio, for those who still care about such things, of about 185. Columbia Bank, for comparison purposes, has a ratio slightly above 20.

Retailers aren’t having much fun these days. Costco has a more Amazon-resistant model than some, not that it’s escaped the impact. The stock is down about 5 percent for the year; it was well ahead until the Whole Foods announcement.

It seems odd to think of Microsoft as overlooked, but it doesn’t get nearly the attention that others in tech do. Still, its stock has had a nice gallop, adding 13 percent this year.

Let’s throw one more company in the mix, even though technically it’s not from around here. Investors are really liking what they’re seeing from Boeing, whose stock is up 32 percent this year, practically an Amazon-like juggernaut.

And that’s great, if you’re fortunate enough to have one of those stocks in your portfolio (and bought them at the right time).

But those are paper returns — not even paper, if you’re getting your brokerage statements online. And paper returns have a way of evaporating (not quite the right term, but work with us on this one) when investor attitudes turn negative.

Which they will, and potentially soon.

The markets’ and the economy’s recovery from the recession are aging. Interest rates are rising. Skepticism about paying huge premiums for companies with no profits is increasing. Weariness and wariness over the ongoing melodrama in the other Washington are growing.

It’s tempting, and dangerous, to get carried away by the gaudy numbers some stocks and markets have posted this year. If you’re not feeling so euphoric, don’t feel left out. You might be getting a lot of company before long.

This story was originally published July 14, 2017 at 1:23 PM with the headline "Your money’s in danger if you get carried away by soaring market numbers."