U.S. market valuations have now reached what they were in 1929, and are therefore the second highest in the country’s history.

Only the Dotcom Bubble was higher.

Currently: 

By any metric you monitor, this is an expensive market.

Valuations don’t strongly predict what the market will do over the next year or so, but these metrics are historically strongly associated with poor long-term returns. The annualized return over the next decade from 2017 to 2027 is not likely to be great for U.S. equities.

Low interest rates are giving bond investments terrible returns, and therefore investors are being forced into equities if they want decent results. But over time, as valuations are driven higher, it dilutes the rate of return equities will provide as well. Many people would say we’re in an economic bubble.

Fortunately, not every stock is extremely expensive. And the tactic selling of options can help you secure lower entry prices.

Union Pacific Corporation (UNP)

Many investors might think of railroads as old businesses that probably perform poorly during recessions due to their cyclical nature.

But the surprising truth is, all five Class I railroads in the United States remained profitable straight through the 2007-2009 financial crisis and severe recession. Over the last couple of decades, improvements in automation have substantially increased their flexibility and reduced their fixed costs. The on-board personnel required to safely operate a freight train is minimal, and engines can be added or removed from the tracks based on shipping demand.