Good news on STI front, but avoid complacency

The report “STI rises to near 2-year high on strong Chinese GDP growth” (July 18) noted that shares in Singapore have climbed to their highest in nearly two years.

The Straits Times Index mirrors the Dow Jones Industrial Average, which has been hitting record highs since last year. This raises a concern, as low volatility may indicate the calm before the financial storm.

For example, a similar calm was experienced before the market crashes of 1929, 1990, 1997, 2001 and 2007. Wall Street stocks are now overvalued at a Standard and Poor’s 500 price-earnings ratio of 25.

The stock market is also trading amid a rising interest rate environment. The end of the current Dow cycle could be on the horizon. Investors should heed the resemblances and avoid complacency about believing that stocks will always go up.