A Conundrum for Investors

 | Jul 01, 2014 | 11:00 AM EDT
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We stock market participants often joke about having "a Goldilocks market," -- not too cold, not too hot, but just right. For the first time in a very long time, investors are facing a true conundrum: Today's market is just about perfect.

Something that has not happened in about 20 years is happening to the markets today. All of the markets are going up in unison. Not just stock markets, but bonds and commodities are climbing higher as well. In fact, the safe haven investment -- the one investors flock to when markets are in turmoil and dispose of when markets are racing higher -- gold, is also up.

For the first half of the year, the Dow Jones Industrial Average was up more than 1.55. Gold is up nearly 10%. The U.S. 10-year Treasury note is up 6%. The MSCI World Index of developed world shares up nearly 5% and the MSCI Emerging Markets Index is up 4.3%. Wherever investors put money, it has appreciated. (Except for cash in the bank, which sits idle and earns virtually nothing.)

So, we are truly in a Goldilocks situation. The last time this happened was 1993. The central banks know this is the perfect recipe for continued optimism. Odds are that they will not risk a setback -- not now. But this halcyon situation (as it relates to money) won't last forever. I'm not saying gloom and doom is around the corner. Aside from a few outliers such as Twitter (TWTR) and Salesforce.com (CRM), stocks are not in nosebleed territory.

Titans such as Bank of America (BAC) look pricey now but are likely to turn out to be attractive, even at today's prices. Dollar General (DG) dropped recently on news that its CEO would retire. The decline is interesting because it comes at a time as activist investor Carl Icahn recently announced a 9.3% stake in rival Family Dollar Stores (FDO). Icahn is calling for Family Dollar to sell itself immediately. As the economy continues to move forward and consumers have expressed a little more confidence, earnings growth from these discount retailers has retreated and Mr. Market has balked.

So this perfect market has created a conundrum of sorts for investors. It's a good time to be invested in a sensible manner and it appears that equities will hold their own at the moment. But this perfect scenario will come to an end. They all do.

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