Is this the Best of Times for Investors …or the End of Times?
Word on the street especially among retirement investors is that it doesn’t get any better than this. With unemployment at a meager 3.8%, GDP growth approaching 4% and corporate earnings through the roof, that is hard to argue against. However, it’s my job to check under the bed for monsters, because we have been here before and it didn’t end well.
That said, I am comfortable agreeing with some of the pundits that things look pretty good for the immediate future. That is not to say that my hand will sway far from the sell button, ready to hit it as hard as that darn Whack-A-Mole game!
We will be able to overcome one hurdle I was overly concerned with: “Sell in May and walk away”. That is the adage that says you should sell everything in May and not re-enter the market until November.
In many years it works. However, it doesn’t apply this year because it typically only occurs when the market is within 2% of it’s all time high. On May 1st this year we were down 8%. Plus, so many people were “Sell in May”, largely because stocks were going through that nasty correction that started in February. In the investment game, things rarely happen when the majority is expecting it to.
I know the latest correction has made us all nervous; with the market about flat for the year and down around 5% from the highs, but I continue to believe that we are just working off the excess optimism we saw in January.
One statistic I just heard really blew me away. In January, only 12% of newsletter writers were negative. That’s crazy. I have never seen that figure so low which clearly shows there was excessive optimism abound. Remember, if everyone is bullish the market typically drops because everyone is invested. Likewise, when most are negative the market will rise.
The bottom line is that stocks go in the direction of corporate earnings, which are rising strongly. That, along with no recession in sight should have stocks strong the second half of the year, which we are fast approaching.
Therefore, I think it’s a great time to be invested but still cautious, especially in retirement.
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Cheers -Keith Springer