If you’ve read my previous post, you’ll probably be thinking, “here he goes… another stock market bear getting ready to spew bull market hate.” This time, however, I’m going to do my best to show the market in a neutral perspective. In fact, I’m a huge stock market bull…. from 50,000 ft.

Anyone can blindly stare at an S&P 500 chart and say that stock values are at absurdly high levels, therefore everyone should sell before it all comes crashing down. Historically, however, the stock market has always produced a positive annual return over the long run. Maybe those buy and hold preachers aren’t just blowing smoke, maybe they’re really on to something. After all, they have Warren Buffet on their side.

To get a better view of stock market performance over the long run, I like to use the annualized rolling average. The charts below show what your annual return would have been over various lengths of time, on a rolling basis. Meaning, if I purchased one share of the S&P 500 in 1900 (yes, I realize it didn’t exist then), what would it have been worth in 1905? How about 1901-1906, or 1902-1907. If you carry these calculations out all the way to current, you’ll have the 5 year rolling average of the market. Then do it again for 10, 20, and 30 years. That’s a whole lot of calculations.

Right now we’re in the 7th year of this unprecedented bull market, the 2nd longest in history. To make number one, it’ll have to surpass the 4,494 day bull market that ran from 1987 to 2000, and ended with the Dot-com bust. As I write this post, the market just posted a new all-time high.

So what is driving the market higher and higher?

If it was pure business fundamentals, like I mentioned in my last blog post, then companies should be doing extraordinarily well. Retailers should be announcing increasing same store sales and foot traffic. Manufacturing should be high with companies like Caterpillar building machinery like crazy to satisfy demand. Employment should be high, with the majority being in higher paying industries rather than retail or fast food. Essentially, the economy should be strong, GDP should be growing at a healthy pace, and major foreign markets should be equally positive, being that we’re part of a larger global economy. So what is reality? Unfortunately, very little of what I just described is actually happening. The economy doesn’t appear to be as strong as market prices would indicate.

Earnings Are Decreasing.

In general, company earnings have been decreasing for over a year. If we look at the S&P 500 Index as a whole, 12-month earnings peaked in Sept. 2014 at $106, and subsequently dropped almost 19% to $86 by Mar. 2016. Meanwhile, the market price increased by over 10% from Sept. 2014 to Aug. 2016.

Building lasting wealth absolutely requires some form of long term investment. For those of us not making $500,000 per year, we cannot just hoard our hard earned income and “save” ourselves to richness. For many, this investment vehicle is stocks and bonds, invested either directly or through retirement accounts such as an IRA or 401k.

Unfortunately, Wall Street as a whole has done everything possible to convince us that we’re not smart enough to control our own investment accounts. They stress that the only way to succeed in the stock market is to hire their “expert” money managers, who they say will have your best interests in mind when choosing investments, but more often than not put you in investment vehicles that either pay them high commissions, or end up under-performing the overall market year-after-year, or both (double whammy). Oh, and we get to pay this money manager a fee for losing our money.

Putting our entire retirement future in the hands of some “expert” stranger seems rather absurd, but millions do it every day. I’m truly discouraged by the fact that the majority of the population are exposed to the stock market in some fashion yet know very little about investing, what makes companies valuable, or the stock market in general.