The Dow Jones Industrial Average hit a record-high of 19,757 on Friday — its highest level, ever.
Time to sell everything?
The thought of the world's largest market hitting a record high will send a chill down many investors' spines who think 'oh no, a crash is on its way'.
If you are a long-term investor, market crashes are an inevitable fact of life. As a rule of thumb, crashes typically occur every seven to nine years. At least, that is what history tells us.
Given we have been in a bull market since 2008, or around nine years, undoubtedly, the rule of thumb would say we are nearing an end of the market's cycle.
The ASX lagging
Despite the Dow Jones Industrial Average hitting record highs, Australia's S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is way off its peak around 6,750, which it achieved back in 2007. At its current level of 5,560, the Australian share market would have to rally more than 21% to achieve a new high.
Fading pockets of strength
In spite of the broader Australian market's underperformance we have witnessed a strong rally in the share prices of local companies which earn a large amount of their sales overseas.
Here is a list of prominent Australian companies which earn a majority of their sales overseas and their share price gains over the past five years:
- ResMed Inc. (CHESS) (ASX: RMD) – 231%
- James Hardie Industries plc (ASX: JHX) – 214%
- Cochlear Limited (ASX: COH) – 110%
- CSL Limited (ASX: CSL) – 196%
Offsetting the gains in these companies are many large resource businesses like BHP Billiton Limited (ASX: BHP) and Woodside Petroleum Limited (ASX: WPL), which have underperformed the market as a result of depressed commodity prices.
Foolish takeaway
Trying to time the market to earn a profit won't work, in my opinion. But in a world of record-low interest rates, a slowing economy and record-high global markets, it may now be wise to take some risk off the table.
