No one seems to agree on what our markets are doing.
It seems like everyone is confused these days. Each client and prospect we talk to is backing a different camp, and many have expressed their outlook not just on what will happen in November, but in June as well. And no, I’m not talking about politics. I’m talking about our stock market.
One question people are asking me often these days is, “What’s your outlook, Dave? Are you a bull or a bear?” Interestingly enough, when this topic comes up and I poll you, either in our client meetings, on the back deck of the country club, sitting by the pool or even on the golf course, it’s remarkable that the results are split about 50/50 bulls to bears. What everyone does agree on when I ask is that this upcoming election will have a huge effect on our economy and stock market.
But let’s step back for a minute. Historically, bulls have outnumbered bears 3 to 1, and typically the majority of people feel positively inclined toward the stock market. Lately however, more and more people are sure that our country is going into a recession that will be forced by downward movement in the stock market, and that we’ll see repercussions across all industries.
I don’t know if that outlook is right or wrong, but for those of you calling for a bear market, my hat’s off to you. It’s bold to be able to make predictions like that, and if you get it right, you’ll be that gal or guy who can brag at all the summer cocktail parties that you were right. If you’re wrong, well, you may find yourself in a bit of pain as you’ve missed out on an incredible market.
The reality is that I don’t know – and neither do you.
Here’s what I do know – Since July of 2014, we’ve had 8 to 12 significant swings in the Dow Jones Industrial Average. Another reality is that the markets are higher now than they were in July ’14, which is amazing considering all the craziness in the world today. All those swings are testing the resolve of the proverbial bulls, and they’re
emboldening the bears who say it’s only a matter of time until the market tops out and heads to zero. All this movement has created a lot of confusion for individual investors who may have been told by their financial advisor that the market average is 7 to 8 percent a year, even though it hasn’t done that over the last two years.
So, why are the markets oscillating back and forth like this? While the rest of the world is in chaos, our economy is chugging along without any super-powered growth, and we’re repeating the post World War II era of low rates as the great refinancing of American debt – both government and consumer – is happening before our eyes.
The markets are really just meandering along and doing the same thing as our economy – which is fine, as the stock market is a reflection of our economy (not the other way around). One thing that is hurting is that individual investors are pulling out of the markets at the highest rate we’ve seen in five years. This is putting a lid on the markets, as individual investors are saying, “Whew – I’m even with where I would have been if I’d bought stock at Christmas of 2014…or St. Patty’s Day of 2015…or Memorial Day of 2015.”
To summarize, I’m going to tolerate each of you having your own opinion on bear or bull markets, and with 20/20 hindsight, someone will eventually be proven correct. But please, don’t ask me to pick a side.
Many times historically there have been periods where the stock market simply hasn’t gone anywhere for a period of time. Remember, the stock market follows the economy, and right now we’re not seeing any huge growth, so there’s little growth in the stock market. But there are areas in the markets right now that provide opportunities for investors.
So if that rich uncle dies, or you hit the Powerball with that ticket you bought at a gas station on your summer road trip, or you get a bonus at work (the markets are so-so, but you’re reaching all your goals at work!), give us a call. We’ll walk you through whatever opportunities exist based on what the markets are doing that week.
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