Predicting the markets 10-15 year movement on long term trends

EvrClrx311

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On May 16th, 2012
http://www.early-retirement.org/forums/f44/stocks-the-next-decade-61422.html#post1195163

(wouldn't let me reply to it... it's too old :D)

Four and a half years later and we've seen at 64.3% return in the S&P500, right in line with the conclusion made in the post from the historical patterns observed. I took a very mechanical approach to this observation... trying not to guess at what short term factors were at work, but instead to focus on the longer term movements.

At the time most (myself included) were questioning the run on the market from it's lows just a few years prior, many were moving to more conservative investments (or staying there if they never got back into stocks after the scare). The general consensus was that volatility and loses were in the forecast for the middle of this decade - as most still felt the pain from the Great Recession. Longer term trends seems to point to the opposite, which was my purpose in looking at the data observed in the post.

S&P 500 closed at 1,324.80 on May 16th 2012
S&P 500 closed at 2,164.45 yesterday

What's so fascinating about this, is that today some still are cautious about the market, but the general feel it isn't as dire as it was in May of 2012... despite the fact that now we really are above the line on an historical trend perspective. Not too far above it, but still above it.

Perfect example of how human nature conspires to make us seriously misjudge the future of the markets. 2012 was a better time to move into equities, and today is a better time to move out of them... yet it feels opposite - I bet you forget how you felt in 2012... compared to today. (I know I did) :cool:
 
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Wow, the prediction about Venezuelan beaver cheese was spot on!
 
Wow, the prediction about Venezuelan beaver cheese was spot on!

Haha. Sort of like the kid who predicted in his 90's HS yearbook photo quote "Cubs win the 2016 world series, you heard it here first!"... if you look far and wide enough you'll probably find a similar quote for every year and just about every team...

My interest in revisiting this is more the human psychology of it. I really had forgotten how dismal my outlook was in 2012 on the future of the markets. This post was an attempt to normalize my negative feel about the edge of the cliff that I felt the market was teetering on at the time... fast forward to today and I've all but forgotten that anxiety about the markets prospects. This specific post caused me to stay invested 100% in stocks rather than moving a portion of it to cash or bonds... and just close my eyes, stay on the strategy I had selected for the long term.

I take myself as a rather pragmatic and rational minded person... yet the "feel" of things were a force across the collective mood of the investing world (human mob mentality, evolved over the years to persuade us to move in collective crowds to avoid being singled out as a target by the tigers) was pushing my investment decisions opposite of what history told me was likely to happen. Begs the question...

Why don't we invest the opposite of how we feel? Better yet, lets just let the computers do it for us :)
 
I do invest mechanically and to some extent against my emotions. If you read LOL!'s market timing newsletter just about every single purchase is made on big down day when the gloom&doomsters are out in force.

If things get too sunny and rosy, then I will see if I need to sell something to get back to my stated asset allocation.

So I have a steady asset allocation plan with transactions generally against the prevailing winds of emotion.
 
In 2012 markets were still recovering from the great recession. I think that from this point, the drivers of future growth are weaker than they were over the last 35 years that I have been investing, and that future returns will be lower.
 
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