But these are not necessarily normal times by historical standards. This economic expansion is not being driven by the metal makers and the metal benders as much as by healthcare, technology and sophisticated service providers. In general, those sectors are home to companies that are growing much more rapidly than the old-line manufacturing businesses. As the complexion of the economy has changed from industry to services, investor preferences have changed as well. Keep in mind, however, that it has always been difficult to find cheap stocks with exceptional fundamentals.
Quality usually costs more.
But while Microsoft may be pricier now, the stock was never on the bargain rack to begin with, and neither were many other good growth companies with solid longer-term prospects. Valuations increased as investors became comfortable with forecasted growth rates that were significantly higher than what we ve seen in the past. Plus, the array of fast-growing businesses cuts across a much wider swath of the economy than just a few years ago. Technology stocks have enjoyed periods of strong gains before, but typically those spurts of outperformance were confined to a handful of stocks within one or two industry groups. Today, it is not just a couple of sectors that are prospering.