This current market....

[marko]

Upfront:
Yes, I know the current (bear?) market has me frustrated
Yes, I know that the 130 year trend is a steady upward move
Yes, I know that thinking "this time is different" is suicide
Yes, I know the following is more of a cathartic rant than a question.

But. Seems that over the past year or so, there has been a real trend in the market that overlooks any good news and just focuses on anything bad.

"If it were not for..." Greece, China, Russia, Syria, Ukraine, oil up/oil down, Fed up/Fed holding, VW, good/bad weather, on and on, we'd be in good shape.

My view is that the overall economy is improving and that pent-up good news on earnings, performance and other factors would eventually mitigate the bad news.

It just seems that regardless of how strong a positive there is, some very minor negative wipes out what should've been a decent week. Week after week it seems we keep getting nailed by an often insignificant issue.

I keep waiting for the market to look at the results from a wide range of companies and say "let's not worry about that minor snowstorm in Ecuador...things are good".

Does anyone else feel that the market is just looking for 'sell' reasons? Or, as is often the case, I'm just out in the weeds here?

Maybe I just need someone to calm me down..........

 

[hnzw_rui]

Don't look. That has worked pretty well for me.

 

[rodi]

I can't figure out the market - so I stopped trying. Like you, I used to expect movement based on certain economic news.... Nope - it's a complete disconnect.

Same with the Fed... I really don't understand a) why the market is so connected to the fed interest rates and b) why the fed is so connected to market gyrations. Seems like all the other indicators provided green lights to raise the interest (lower unemployment, minimal inflation, etc.) But the fed seems afraid to raise the rates because it might trigger selloff... so that in turn, triggers sell off. The market and fed seem to be too tightly coupled in a feedback loop.

 

[NW-Bound]

... Does anyone else feel that the market is just looking for 'sell' reasons? Or, as is often the case, I'm just out in the weeds here?

Maybe I just need someone to calm me down..........

No, I do not want people to calm down. I want them to go freakin' nuts and sell.

Let's get the market to crash hard to get this over with. I have seen 2 crashes in the last 15 years, what's another one?

This time will be different, I swear. I still have 40% cash, and this time I will go "all in".

 

[Animorph]

There's a good case to be made for thinking the market will do just fine, because it is looking to sell all the time. It's when the market is looking to buy all the time that it runs into trouble.

 

[marko]

This time will be different, I swear. I still have 40% cash, and this time I will go "all in".

That might be my signal to sell....

 

[MichaelB]

This time will be different, I swear. I still have 40% cash, and this time I will go "all in".

That's exactly what's keeping the market from that third crash.

 

[NW-Bound]

That might be my signal to sell....

I would go all in if the market dropped to 50% from its high, like in late 2002 and early 2009.

Sure, go ahead and sell in that market condition. I guess I would have to go on margin after being "all in". Somebody will have to buy from you to keep up liquidity.

 

[NW-Bound]

That's exactly what's keeping the market from that third crash.

But I am not buying yet. Not enough fear in the market. Need more blood in the streets. Need to see more posters lamenting about cutting back travel, doing OMY, etc...

 

[CaliforniaMan]

I feel euphoria each time the market, or rather my portfolio, makes a new high. But then I realize that I have not made anything unless I sell. It could all evaporate tomorrow. But I cannot sell, because what would I do then? When would I get back in. So my euphoria evaporates and gives way to fear that it is going to fall.

Then on those days when the market (and my portfolio) are making new lows, I am depressed that I won't have as much to spend next year, but then start feeling good that the market is at a more stable P/E ratio, maybe more stable.

Then I realize. I won't know if I have won the game until the day I die. But then I won't know either, I will be dead.

So I guess until then I will just lie in my hammock and forget the whole thing. I am still alive, still have enough to eat, places to go, things to see, people to talk to. Life is good.

 

[Texas Proud]

I still remember the 25% down day way back when....

I have watched off and on what the financial pundits say... during most of the years I have been watching, there has been negative news... it is not 'new' that the market only looks for negatives... the only time I can remember most things being mostly positive was during the dot com run up...

But somehow the market keeps going up over time... despite all the negatives... so I just keep my investments where they are and reap the rewards...

BTW, I am negative over the last 12 months.... does not make me feel good, but I am not going to 'get out' due to a correction (which usually comes once a year, not every 5 years)....

 

[RetireBy90]

The problem with the market is that sort term people vote with emotion but over the longer term it follows fundamentals. So if you have a 20 year horizon then you can invest based on what you expect earnings will do but when you have a short term horizon it behaves more like high school popularity contest. And guess what, it is us that feed that beast. For one, I tend to get a lot more anxious when I have a 10% drop that impacts by 6 figures than I did when I had 25K in the market. Starts adding up to real $$, at least to me.


One other reason that good news doesn't show up in market numbers is that today, we have had what 7-8 years of a bull market ? I think I heard this has been the 2nd longest bull in history without a 10% correction, or something like that. we have had a good run since 2008 so if this time isn't any different, then we should be due or overdue for a bear market, mild recession, some period of other than up up up. I think many are looking to avoid a loss that would come with a bear market or a short recession, and see it behind all these events that otherwise may be so significant.

 

[Totoro]

Same with the Fed... I really don't understand a) why the market is so connected to the fed interest rates

Not sure if that was a question, but fed interest rates are important since it regulates inflation and most other interest rates.

Higher interest rates in general push up bond rates and lower profits (companies pay more interest on borrowings). This makes bonds more attractive vs. stocks (earnings yield).

At least, that's the theoretical line of thinking. Crowd responses are a mystery to us all.

 

[rodi]

Not sure if that was a question, but fed interest rates are important since it regulates inflation and most other interest rates.

Higher interest rates in general push up bond rates and lower profits (companies pay more interest on borrowings). This makes bonds more attractive vs. stocks (earnings yield).

At least, that's the theoretical line of thinking. Crowd responses are a mystery to us all.

See - that makes sense. But the market sold off when the Fed kept the zero interest rate thing going last week. The market reacts to the Fed - but not always logically.

Crowd response I guess explains it... Since I lean towards INTJ - I guess I don't like crowds.

 

[LOL!]

See - that makes sense. But the market sold off when the Fed kept the zero interest rate thing going last week. The market reacts to the Fed - but not always logically.

The market did not "sold off" last week. It simply returned to where it was at the beginning of the week after going up in anticipation of the FOMC meeting. Since the meeting changed nothing, the market went back to where it was before the anticipation gains during the week. That seemed very logical to me.

The market will only go up on very good news. On bad news it goes down. On no news it goes down. The market just gets wound up like a spring waiting for some good news. No good news, the market goes down.

And don't forget that "the market" is really made up of people and computers trading stocks. Can you figure out the psychology of the market by figuring out the comments of people on this forum? I think so.

 

[audreyh1]

The problem with the market is that sort term people vote with emotion but over the longer term it follows fundamentals. So if you have a 20 year horizon then you can invest based on what you expect earnings will do but when you have a short term horizon it behaves more like high school popularity contest. And guess what, it is us that feed that beast. For one, I tend to get a lot more anxious when I have a 10% drop that impacts by 6 figures than I did when I had 25K in the market. Starts adding up to real $$, at least to me.


One other reason that good news doesn't show up in market numbers is that today, we have had what 7-8 years of a bull market ? I think I heard this has been the 2nd longest bull in history without a 10% correction, or something like that. we have had a good run since 2008 so if this time isn't any different, then we should be due or overdue for a bear market, mild recession, some period of other than up up up. I think many are looking to avoid a loss that would come with a bear market or a short recession, and see it behind all these events that otherwise may be so significant.

Well we did get our >10% correction, so at least that clock restarted.

 

[audreyh1]

Upfront:
Yes, I know the current (bear?) market has me frustrated
Yes, I know that the 130 year trend is a steady upward move
Yes, I know that thinking "this time is different" is suicide
Yes, I know the following is more of a cathartic rant than a question.

But. Seems that over the past year or so, there has been a real trend in the market that overlooks any good news and just focuses on anything bad.

"If it were not for..." Greece, China, Russia, Syria, Ukraine, oil up/oil down, Fed up/Fed holding, VW, good/bad weather, on and on, we'd be in good shape.

My view is that the overall economy is improving and that pent-up good news on earnings, performance and other factors would eventually mitigate the bad news.

It just seems that regardless of how strong a positive there is, some very minor negative wipes out what should've been a decent week. Week after week it seems we keep getting nailed by an often insignificant issue.

I keep waiting for the market to look at the results from a wide range of companies and say "let's not worry about that minor snowstorm in Ecuador...things are good".

Does anyone else feel that the market is just looking for 'sell' reasons? Or, as is often the case, I'm just out in the weeds here?

Maybe I just need someone to calm me down..........

I think the market got ahead of itself after the big run up in 2013, so from here I don't expect much as the good economic news is already baked in IMO.

At least we got past the 10% correction, not that there won't be a retest.

 

[NW-Bound]

Yes, the market has gone up quite a bit the last few years, and is currently fully valued. That's how I have cut back my stock AA from 80% in 2010 down to 60% now. A big move up is highly unlikely, but a crash is not likely either. Whichever it moves is fine with me. I will buy or sell as I see fit.

I feel euphoria each time the market, or rather my portfolio, makes a new high. But then I realize that I have not made anything unless I sell. It could all evaporate tomorrow. But I cannot sell, because what would I do then? When would I get back in. So my euphoria evaporates and gives way to fear that it is going to fall.

So, we should sell some. But we don't, because greed is still stronger than fear.

Then on those days when the market (and my portfolio) are making new lows, I am depressed that I won't have as much to spend next year, but then start feeling good that the market is at a more stable P/E ratio, maybe more stable.

And we should buy. But we don't, because we have no cash, or we are afraid the market will drop more. Our fear at this point is stronger than greed.

Then I realize. I won't know if I have won the game until the day I die. But then I won't know either, I will be dead.

Even before I die, unless it's a sudden death, I will be bedridden and in misery for a while (hopefully not for long). I doubt I care about the market at that point.

But until then, I still find the market interesting, and follow it. I no longer watch the financial TV, but reading the threads here is enough. When it's time to buy, hopefully I will not miss it.

So I guess until then I will just lie in my hammock and forget the whole thing. I am still alive, still have enough to eat, places to go, things to see, people to talk to. Life is good.

I just came back from TotalWine. I went there to look at some bottles that I reseached online, and just ordered a few cases for my daughter's wedding. I am going to sample them to make sure there are no surprises. And I even picked up a bottle of Cognac and one añejo Tequila for myself.

Now, I surfed the forum and looked at the market again. Life's indeed good.

 

[marko]

The problem with the market is that sort term people vote with emotion but over the longer term it follows fundamentals. So if you have a 20 year horizon then you can invest based on what you expect earnings will do but when you have a short term horizon it behaves more like high school popularity contest. And guess what, it is us that feed that beast. For one, I tend to get a lot more anxious when I have a 10% drop that impacts by 6 figures than I did when I had 25K in the market. Starts adding up to real $$, at least to me.


One other reason that good news doesn't show up in market numbers is that today, we have had what 7-8 years of a bull market ? I think I heard this has been the 2nd longest bull in history without a 10% correction, or something like that. we have had a good run since 2008 so if this time isn't any different, then we should be due or overdue for a bear market, mild recession, some period of other than up up up. I think many are looking to avoid a loss that would come with a bear market or a short recession, and see it behind all these events that otherwise may be so significant.

Good input. And thanks!

One reason I wonder about an overdue bear market is the current unusual circumstance where so much cash remains on the sidelines since 2008.

 

[ESRwannabe]

Once I started focusing on building income instead of capital gains, I was able to see steady progress every year since then. Even during the scariest parts of the last recession.

Once I started focusing on income I no longer dreaded down/flat markets. On the contrary those are the easiest times to find opportunities. My biggest issue is finding reasonable investments during bull runs, but even then I can find good deals if I am willing to go deeper (sectors, and then individual companies).

It's only during down markets that broad indexes are worth buying. The lower the market goes the more broad my investments can become. When its a bull market I get forced into smaller and smaller pockets until I'm finally left looking only at individual companies, as there is always a crisis somewhere that I can use to buy at a reasonable price.

The recent downturn in oil has allowed me to go long on the MLP index (AMLP). If the market as a whole would tank I could start putting money into VYM (vanguard high div yield index). If it really tanks hard then I buy VIG (vanguard div appreciation index).

There's always something out there to buy if you are flexible.

 

[CaliforniaMan]

...
I just came back from TotalWine. I went there to look at some bottles that I reseached online, and just ordered a few cases for my daughter's wedding. I am going to sample them to make sure there are no surprises. And I even picked up a bottle of Cognac and one añejo Tequila for myself.
...

Most excellent plan! You need some help checking them out?

 

[NW-Bound]

Thank you for the help, but I think I can manage.

I still have to think of some food to make, for when I call the kids over to taste the wine. I need to go get some lamb shanks. When I mentioned to my son-in-law about the stewed lamb shank, he was salivating. He still remembered the lamb chop I made at an earlier dinner.

By the way, I have been going to Bevmo, but just recently checked out Total Wine. I like the wider selection at Total Wine.

 

[LOL!]

The idea of no 10% drop in a while is simply a technicality.

Certainly in August 2015, the 10% drop was breeched by US total stock market, US S&P500 index and Total international stock market.

In October 2014, international stock index was down 10% from an intermediate high and US stocks were down 7.5%.

In June 2012, international stock index was down 15% from an intermediate high in April, while domestic stocks were down more than 9%.

Fall of 2011 had the down 20% to 26% markets.

So while the news media may have selected memory, we don't have to believe them.

The current market seems pretty typical to me.

 

[ownyourfuture]

"Yes, I know the current (bear?) market has me frustrated"

**I did notice the question mark behind (bear?)**
Here's one definition of a bear market.

Although figures can vary, for many, a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones industrial average and/or the Standard & Poor's 500 index over at least a two month period, is considered an entry into a bear market.

According to this definition, we aren't in a bear market, & I would tend to agree.


"My view is that the overall economy is improving and that pent-up good news on earnings, performance and other factors would eventually mitigate the bad news"

No disrespect, but how long have we been hearing that 'the economy is improving' ?

We've had historical low interest rates in most of the world for the past seven years. With that enticement for people to spend, how is it going to get better, how are earnings going to improve, especially if the fed starts raising rates at some point ?

As far as 'good earnings' I have to disagree. Of course there are companies out there whose earnings have exploded over the past 7-10 years. Netflix, Priceline, Chipotle, Apple, etc.

But the vast majority of large US multinationals haven't.
I don't have any figures to prove this, but It seems a lot of large multinational US corporations, have used share buybacks over the last 7 or 8 years to 'artificially inflate' earnings growth.


Another concern I have is the percentage of Americans that pay Federal taxes.

For tax year 2011, the non-partisan Tax Policy Center estimates that only 54 percent of Americans will pay Federal income tax. **I realize this is three tax years removed, and things could have improved by this point**
Source: Is it true that only 53 percent of Americans pay income tax? - HowStuffWorks

I don't have the proper vocabulary to try and explain what this means.
I only know it's probably not a good sign when 46.00% of 1040 filers get back as much, or more than they paid in.





Interest rates:

For 32 years, interest rates have been on a downward trend.


In those 32 years, US companies downsized, & outsourced overseas.
Plus throw in the technology factor ,especially in manufacturing & it adds to more unemployed/underemployed.

Corporate America has had the 'perfect storm' for earnings growth over the past 32 years. And I feel that's coming to an end now.
I'm not saying interest rates are going to 1970s levels,. I hope they never get close to that, but I do believe they'll be going up in the near future

My simple opinion is this. The great productivity boom is over & earnings peaked a couple years ago.

I'm not trying to be a Donny Downer, I'm not going to get political, & I'm definitely not saying the market is going to crash, or has to crash.
My prediction is that the major averages, Dow Jones , S&P 500, & the NASDAQ, will probably go nowhere for the following 3 to 5 years.

Of course, there's always going to be individual companies & sectors that do much better than the averages.
And if you're good enough to pick them, you'll do very well.

As for me, I continue to hold stodgy old companies like, AT&T, Colgate, Johnson & Johnson, 3-M, Emerson, Eli Lilly, Kraft Heinz, etc.
Dividends, dividends, dividends!!

I also own Novartis, which I like to call the Johnson & Johnson of Europe,
a couple healthcare related REIT's, & a couple healthcare related ETF's.

As a matter of fact, I added some Fidelity MSCI Health Care ETF (FHLC) today. It was down around 2.00% this AM, and I couldn't figure out why ? Later I saw that Hillary had tweeted something about high drug prices & it send those stocks down.

All this being said, I hope I'm dead wrong & all the major averages skyrocket the next 3 to 5 years.

Good luck to all

 

[heeyy_joe]

No serious worries now. 2016 will be fine. Beware 2017/2018.

Presidential Elections and Market Troughs

Presidential Term Month and Year
of Market Bottom Year During
Presidential Term
When Market Bottomed
1942 – 1944 4/42 2nd Year
1945 – 1948 10/46 2nd Year
1949 – 1952 6/49 1st Year
1953 — 1956 9/53 1st Year
1957 – 1960 10/57 1st Year
1961 – 1964 6/62 2nd Year
1965 – 1968 10/66 2nd Year
1969 – 1972 5/70 2nd Year
1973 – 1976 10/74 2nd Year
1977 – 1980 3/78 2nd Year
1981 – 1984 8/82 2nd Year
1985 – 1988 12/87 3rd Year
1989 – 1992 10/90 2nd Year
1993 – 1996 4/94 2nd Year
1997 – 2000 8/98 2nd Year
2001 – 2004 10/02 2nd Year
Average = 1.87 years into presidential term