A dose of reality is no bad thing. I received a call from an investor who was in a very foul mood. Like some others, he bailed out of all his stocks after the recent correction.
I calmed him down and told him that well, in a secular bull market, it does not matter if the news is good or bad, stocks rise. In the bear market, they fall whether news is good or bad. He is still worried about an overheating economy, sticky inflation, and higher for longer interest rates.
I have learned that markets will always do whatever they have to do to surprise or screw people up. The market is always right, even if all the prices appear wrong. So, is it better to just turn off the TV and read some novel? Do I know something that the big boys who probably read, write and speak better than me, do not? Clearly, my investors know where I stand on the markets from the big picture perspective.
The bulls and bears can argue till they are blue in the face. For a few years now, I have been avoiding betting on really bad things happening something like another crash similar to 2008. Many times in my work, I have warned against alarmist forecasts which we see and hear from a number of self-destructing financial gurus. Don’t laugh please!
For those that have followed me through the years, you would likely know that, while I have not been perfect, I have called almost every major turn in the key markets on our radar. I have been stuck in the stock market bull camp for a number of years now. I’m still a bull but I never chase anything blindly. No one is going to get fired for avoiding doing stupid things.
Investors should invest when optimism is low, not high. All pullbacks are temporary. I know it has been a difficult two years in the markets. If any investors had patience, then temporary pullbacks wouldn’t matter. To the leveraged traders, three months sounds like a lifetime. To the long-term and boring guys who do not usually move in and out of positions easily, it is mere seconds.
What is next on the menu? With rates perched at a 22-year high, there are not going to be surprises from the Fed meeting this week. I’m not suggesting that Powell is hopeless. We all know that the Federal Reserve has implemented the most aggressive monetary policy since the days of Paul Volcker. Nothing goes up in a straight line and September is living up to its nefarious reputation as a cruel month for stocks. The chart speaks for itself.
