Welcome to the end of the week! Just sit back, relax, and enjoy this weeks roundup in another edition of Happy Hour.
One Foot Out the Door
Gallup started the week off with an eye-opening poll showing just how excited the average person is about the stock market. They’re not!
After the S&P gained 16% in 2012, followed by 32% in 2013, you’d think those returns would induce chasing. Guess not. Of course, only 7% of those polled actually knew the market was up 32% last year.
Instead, if investors were given an extra $10,000 to invest, most would keep it in cash or a CD. And the overwhelming majority are nervous about investing more money in the market.
This is in spite of the constant drumbeat of bubble talk spewed by pundits and headlines in the past year. Or maybe it’s due to it?
This poll is not about the minority of investors that did nothing and rode out the crash. Nor is it about the sliver who saw a lifetime opportunity and bought the bottom. Why would they be concerned now? They experienced the worst and survived it.
Instead it’s the views of everyone who did the wrong thing at the worst time – sold near the bottom and missed the recovery. Only recently are they cautiously investing again.
You could argue that every tick higher moves their foot further out the door. They’re simply looking for an excuse to get out early. The scars from the crash still linger and will continue to do so far longer than any of us can imagine.
There is a disconnect between the headlines and reality that happens too often. Your picture of the world is influenced by those around you. Wall Street has a much different view than a farmer in Iowa, a middle class family of four, or a retiree. Assuming we all see the same thing is naïve. And claiming exuberance when those most hurt by the crash are very cautious is pure ignorance.
Indeed, most of the daily information spewed is useless or irrelevant to your situation. There’s nothing wrong with being cautious or nervous until you flinch at the next market move or headline – that rarely turns out well.
Last I checked, my investment horizon could be 50 or more years. Medical advances keep extending it. I could waste my time trying to solve the unknown of the next few months or years. Or I could stick to my process and plan for the next 50.
Last Call
- Smart Investors Ignore the News – Marketwatch
- An Honest Stock Market Update – M. Housel
- The Error-Proof Portfolio: 4 Bad Reasons to Sell a Fund – Morningstar
- The Power of Shareholder Yield – J. O’Shaughnessy
- Finding Smart Beta in the Factor Zoo – Research Affiliates
