Is the Stock Market Record-Bound Again?

Just two weeks ago, many expected a major correction. Now, indexes are pushing toward record highs again. Who's right?

Feb 15, 2014 at 11:30AM

If you watch the stock market's daily movements, 2014 has been an extremely bumpy year for stocks. The S&P 500 (SNPINDEX:^GSPC) started out the year dropping nearly 6% on fears that the five-year bull market had come to an end. Yet now in less than two weeks, the S&P is back with about half a percentage point of a brand-new all-time record high. Investors are left wondering what's driving the volatility and why such a disparate set of individual stocks has led the index higher.

Akamai Technologies (NASDAQ:AKAM) has been the biggest winner in the S&P 500 since it bottomed out on Feb. 3, jumping more than 30%. The content-delivery network dodged a bullet when fears that its biggest customer would abandon it to build its own in-house offering proved unfounded, with Akamai instead renewing a contract to extend their relationship further. Given the importance of the Internet, Akamai's acceleration technology should remain relevant for a long time.

But companies from vastly different industries have also put in huge performances. Luxury retailer Michael Kors (NYSE:KORS) has been a huge success ever since it went public, and it has redefined the pecking order in the luxury world, putting competitors to shame even as it produces almost unbelievably high growth rates in earnings and same-store sales. The stock's 28% gains show that high-end consumers are still strong and spending on what they perceive as the best-quality goods in the market.

For online travel review and booking service TripAdvisor (NASDAQ:TRIP), gains of almost 24% came largely from signs of consistent growth in its most recent earnings report, with total traffic climbing 50% and the site seeing better performance from click and display advertising as well as subscription revenue. By combining reviews with the ability to book travel, TripAdvisor hopes to give its customers the best of both worlds while remaining unbiased in its information.

Cliffs Natural Resources (NYSE:CLF) is the big surprise on the list, rising almost 23%. Even though the iron-ore and metallurgical-coal producer continues to face tough conditions in its industry, it has done a surprisingly good job at fending off hedge fund activists at Casablanca Capital. Part of the gains might have come from its stubborn resilience in the face of massive short-selling activity, with about 36% of its float sold short -- the most of any stock in the S&P 500. If Cliffs can survive through the worst of conditions in the steel industry, which uses its products as raw materials, then these gains could be the tip of the iceberg for Cliffs.

Look for a record test
One thing is certain: The S&P 500 is at a key inflection point. If it can indeed set new records, then investors might well gain enough momentum to start another leg of the long bull market. But if the S&P 500 falls short, then the disappointment could spur an even larger correction than we saw in January. Only time will tell which scenario plays out, but investors should be ready for both possibilities.

Don't be afraid to invest
Even at record highs, investing is still a smart move. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Michael Kors Holdings and TripAdvisor and owns shares of Michael Kors Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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