Markets have continued their bull run today. It is frankly speaking, quite an amazing run. I am of course very happy at the current market situation. However, I also notice many analysts and such coming out to say a correction is inevitable, and that this cannot keep on continuing.
They are both right and wrong. We just had a report that says that the majority of analysts are behind the curve. They tend to be overly bullish at the top of the market, and overly bearish at the bottom. It is true that no market can go up in a straight line, and that applies for both on the way up, and on the way down. However, it is important to ask ourselves whether we are focusing on the near term movement on the market (tomorrow, or the next couple of days), or much longer than that (when the entire economic recovery cycle is played out).
I see the large number of people coming out to be cautious as a good sign! This means that the stock market is climbing this big wall of worry. There is lots of worry about, and if you want to be cautious or negative, there is no lack of doomsday scenarios that can be painted about the global economy.
It is this type of environment that creates the kind of upside possible where the investors ahead of the curse will make the most money. This environment of uncertainty, where there are as many people calling to sell as there are people calling to buy, is where there is opportunity! If we wait until we are in an environment where everyone is firmly telling anyone willing to listen to buy and there are little or no detractors. That is when the economy is already firing on all cylinders, when there is no cloud in an all clear sky. It is also then when markets would be already well overvalued because since everyone is already firmly convinced there is no way for the market to go but up, then everyone is already in the market.
But by then, if everyone is already in the market, there is no one else to further buy into the market and bring it to new highs. On the contrary, in an upward climbing market, there are lots of uncertainty (just as there is now), there are different camps of thought and people calling for conflicting actions. This type of market will go through corrections, but as the full economic recovery takes hold, the detractors will turn bullish themselves. And then, when they buy, which would be at a much later date when more positive data comes out, it would create future rounds of demand that will push the market higher. This is the kind of situation that creates a sustained market rally. Not one whereby everyone is in agreement that this is it, the market rally is here.
We could be in a once in a lifetime kind of position without even knowing it. At risk of sounding overly optimistic. I would point to history as my guide. The last time the US stock market, indeed the global stock market took such a hard knock as how it crashed in the year 2008 was back over 70 years during the great depression. Not even world war two, the two oil shocks, and all the other many crisis that have occurred since then as ever resulted in the kind of crash we say in the year 2008 (it was only just last year!).
There is far more opportunity to be had after such major crashes than there is if it did not happen. We may not ever see another crash of such a magnitude in our lifetime again. If you woke up from a 20 year coma, and discovered that markets had in the previous year just crashed 40 to 50%, and that even with the recent months of rally, they are still up to 30% off their all time highs, would you be excited?
I am looking at the huge uncertainty out there, the caution (understandable), the detractors, the bears whose voices are just as loud as the bulls. Then, I look forward one to two years after which I am pretty sure the economy will be well in the midst of a full recovery and there will be positive numbers galore. How many of the bears will only then turn into bulls?
Personally, I am excited, and I am also very hopeful right now and it is exactly because there are people who are still very negative, and these include even analysts and fund managers alike. The more people who are currently negative, the more that will join the bullish camp once economic fundamentals truly start to improve. And thus, the bigger the buying wave in future that will continue to push markets higher. So, at this point, I am one of the bull champions, but I don’t mind that there are bears about, that just makes it all the better!
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