The S&P 500 and Nasdaq Composite reached new highs, that despite the daily broadside of negative news about the economy, tariffs, trade and growth prospects here and abroad.  Investing is all about the future, of course, not this year's results. That explains why stocks are up.

Although third-quarter earnings are in the daily news, expectations for next year's profits matter far more. S&P operating earnings next year, assuming no recession, will range from $160 to $180, which means the market is trading for 16-18 times earnings, by historical measures neither cheap nor expensive.  Most analysts would call it fairly valued under normal conditions, but times are not normal given rock-bottom interest rates, the likelihood that they will fall even more, and most important the abnormally unattractive alternatives. 

By the way, have you noticed that we no longer hear about the inverted yield curve and its implications? Two reasons. First, the curve's inversion was brief and focused only on one pair of many maturities. And it is far from inverted now. Second, bad news sells. 

While the market is at its high, investors can still buy low. The pharmaceutical sector has lagged other areas, is undervalued relative to the market and has higher yields. The reason: The drug companies have headwinds in Washington and have for years. Yes, there will be changes to the way healthcare is accessed and paid for, and there should be. But not to a degree that devastates the industry. Plus, drug and healthcare companies are not at risk due to rising tariffs since China does not want to make badly needed drugs and medical products any more expensive. No one does. 

While investors can buy the SPDR S&P Pharmaceuticals ETF (XPH), I hold individual pharmaceutical stocks in my client portfolios. My favorites are Merck (MRK) and Pfizer (PFE), both of which blew past earnings estimates earlier this week. For Merck, Keytruda’s quarterly sales topped $3 billion for the first time. China sales for Merck’s vaccine Gardasil rose 90 percent in the quarter. Pfizer sales of breast-cancer drug Ibrance rose 24 percent to an annual $5.1 billion. Earnings estimates were raised. 

Investors can buy the market at it hits new highs using passive mutual funds or ETFs, or if they don’t want to chase strength they can look to the healthcare sector. Bottom line: There are opportunities for investors, both to buy breakouts and buy laggards.