I’ve seen a lot of news recently about the nearly 16% rally in the S&P 500 so far this year. Is the market getting too hot for its own good? Does this mean a correction is coming? To find out, I interviewed some professional investors about their views on current market mood and where things might head for the rest of the year.
Market Anxiety
I started by asking Topher Turvy head of market portending at Golden Sacks about the recent spate of upness in the markets. “This quarter’s surge in stocks makes me extra jittery, because market risks certainly remain out there, like Trump’s recent Tweets about wanting to learn Mandarin, and Theresa May’s dog reportedly dying from a Belgian waffle overdose.” He elaborated, “It’s either that or because I ordered a triple shot this morning, instead of my normal double shot.” Turvy noted that he wasn’t antsy about the correction itself. He’s more fretful that “institutionalized investors might parry the retail investor’s reaction to the jeers of gloating shorts.”
Hercule Derrier, chief honcho at Choclit Swiss, agrees that investors may have unwisely boomeranged out of the end of last year’s bottom. “History has shown that the market goes up 70% of the time. The 20% decline in the last quarter of 2018 was really scary for investors, because it represented almost the whole rest of the time. And if there’s one thing we know at Choclit Swiss, it’s that resting in a hole is one of the worst things you can do as an investor.”
Looking Ahead
The investing waters are particularly murky going into May. Many point out that the yield of natural gas inverted over live cattle futures this year, raising the odor of an earnings recession or even a stampede depression. On the other hand, Bruce Groine, lead data savant at Bunny’s Melons Wealth Management offered, “If more than the average 62.31% of the S&P 500 companies beat earnings forecasts this quarter, particularly in economically tender areas like consumer energy and discretionary services, that’s likely a healing sign.”
Getty Elder, mature vice president at Felonity countered, “I remember way back at the beginning of the year the market revival was healthy and broad, but now it feels more feeble and stooped. Not to mention that the volume has become muted and spreads have shriveled.” Teddy Lawrence at Barflays Bank added, “It seems like the bloody camel spirits have their noses under the tent, which is making the markets a bit more spumescent, if not downright barmy.”
Timing the Fall
I turned to hall-of-fame technical analyst, Claire Voyant at More or Less to ask when the correction would show its face. She started by pointing out that, “The technical fulcrum zone based on the renowned 2.8612551 Liberace sequence derived from the summer-of-love 1967 highs and the winter-of-discontent 2008 lows (normalized to the ratio of spring forwards over fall buy-backs), is around exactly 3,102.117 for the S&P 500. She added, “The market has hugged the upper trend line from the January 2018 highs and kissed the lower trend line from the 2009 lows many times in the past several weeks. The resulting wedgie points to a climax in October 2019 at precisely the 2.8612551 Liberace sequence.” An alluring coincidence? Voyant replied, “I can’t say for sure, but it’s certainly suggestive of something prominent emerging from under the covers.”
Look Out Below
How much could the market retrace? Each year the market pulls back an average of 9.87% from a recent high, like a bad hangover. So, that sort of ebb shouldn’t make you edgy, and even a 4.79% droop would leave the markets still digesting most of their gravy for the year. But if the markets see a greater than 11.23% pullout (the unsanctioned marker for a so-called amelioration), or even worse, a 21.46% evacuation (the folksy delineation of an ursine market), then all eyes are on the bets. That could be meaningful, if the Fed is out to lunch. Or it could be a buying opportunity, if the economy keeps cooking. It’s hard to say how much the markets could retrace.
The Take Away
What’s an investor to do? Buy the slumps? Dump the bumps? Or hold your chumps? May-Bee Mistaikin at UrBS Wealth Management says, “When the dust settles, we’ll realize this is not a fundamental reckoning. The fray will be enduring but the downside pressure will be fugacious. My sense is to take profits slowly but dump your winners quickly. Likewise, it could be a good idea to snatch up losers aggressively while cautiously preserving your capital.”
These experts are paid to consider all the options and cover all the bases. While uncertainty always exists, they all seem to agree that ignoring the bumpy road ahead makes it hard to get home.
Mindful Conclusion
Hopefully, my point is clear. Most of the market news you see and hear is nonsense appealing to our fears and greed. I define “market news” as stories that focus on daily, weekly, or monthly market shifts or imply that such shifts are worthy of concern or action. I also include as nonsense any finance news that foretells or even suggests the timing or nature of future market events.
Although I’m sure many people act upon nonsense news, the media business doesn’t care whether you act or not. They care whether you click on that link or buy that subscription for another year. As a result, a fair amount of the market and investing news is entertainment parading as information.* Unfortunately, some professional investors are willing to give interviews for the nonsense news or make vacuous predictions, because it’s a free way to advertise their services.**
Whenever you see or hear market prognostications, try to remember the mindful conclusions that I and many others have written about time and again:
- Emotional investing is failed investing.
- Don’t act on short-term market gyrations; mindfulness can help manage that urge to act.
- Buy and hold stocks for the long-term (more than 10 years).
- Timing the market is a loser’s game; no one can predict the future with any consistency.
- Don’t act on “expert” advice in the news. Even the very best investors can’t consistently beat the market.
If you keep these things in mind, there’s no harm in reading that alarming market news. I read stuff like this everyday just for a few laughs.
* Note that I don’t extend this to “all” investment news or news in general. Reputable news sources certainly provide many useful facts on investing, finance, and the world in general. But today you have to be very careful about who’s presenting the “facts”, what their motivations are, and consider whether they back their claims with verifiable data or logic.
** I’d even be willing to guess that only a small minority of professional investors take part in the nonsense news. I certainly never hear Warren Buffett or Charley Ellis talking about daily market ups and downs or predicting what the markets will do next.
