As Stocks Hover Near Records, Growth Worries Linger

NEW YORK – The decade-old bull market reclaimed record territory in the second quarter, thanks to rallying technology shares and shifts in global monetary policy, but as investors head into the second half of the year, they are grappling with signs that the economy’s expansion is slowing.

Many investors are finding it increasingly difficult to discern how much longer the run can continue.

The US and China met at the Group of 20 Summit in Japan to iron out disagreements on trade that many investors say have crimped growth and muddied the outlook for corporate profits in the coming quarters. The trade relationship between the world’s two biggest economies has a bearing on the Federal Reserve, which has hinted at – but not committed to – lowering interest rates.

So far, the uncertainties haven’t dissuaded investors from betting on US shares rising. The S&P 500 finished Friday up 17 percent for the year, marking its best first half of a year since 1997, according to Dow Jones Market Data. Much of the gains were fueled by a handful of technology stocks, with such companies as Amazon.com Inc., Facebook Inc. and Netflix Inc. up more than 20 percent this year.

Yet even with stocks sitting near records, many investors say they are questioning the durability of the gains.

After its latest leg higher, the S&P 500 is trading at around 16.7 times its next 12 months of expected earnings, according to FactSet, above its 10-year average of 14.9 times earnings. Its price-to-earnings ratio is above that of benchmark indexes for developed markets in Europe and Asia and emerging markets, indicating US stocks look relatively expensive.

“Do I think the market is priced to allow the possibility of a recession? Not in the US,” said Rob Arnott, founder of investing firm Research Affiliates, which advises on roughly $182

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