Is a Successful Stock Market a Good Thing?
In 26 years of being a financial advisor, I have come across one phrase that has been consistent with most people when it comes to money.
I don't understand.
Most people don't understand how money works much less the complicated nature of investments. Thus, they just try to gain as much knowledge as possible and just get by. At the same time, investors get bombarded by terms and lingo that they don't understand. Of course, the media and its bias reporting doesn't help anything. They just report what they see and report as if there are no risks. Even the calmness of the eye of a hurricane appears to be a sign the worst has passed. That is until the other side of the hurricane hits.
I want to write about today's market from a perspective that is easier to understand.
Yes it is true that the stock market has hit all time highs as measured by the S&P 500. Said another way, the stock market is as good as it has ever been in history. To add to that fact, the stock market has just set a record of being in the longest period of prosperity in history. What is there not to like?
You have to be aware of another fact.
The stock market throughout history has alternated between long periods of time that have been good to be in stocks to long periods of time when it has been bad to be in stock. Throughout history, it has consistently alternated between the two periods. Could it be that the good times are about to come to an end? Just because we are at historic good times for the market does not necessarily mean they have to come to an end. However, it does mean that they are closer to the time when good things WiLL come to an end.
Leading up to that change from good to bad, you see two attitudes prevalent among investors.
"Everything is great for the stock market. It is easy to make money in stocks."
"This can go on for a really long time."
As they say, the news is always the best at the top. This is the attitude of today!
No one has a crystal ball that perfectly predicts what is going to take place with the market. All we go go by is probabilities. The probabilities are that we are closer to the end of the good times then the beginning or the middle. As I always say, know the risk you are taking and be comfortable with it. Assuming that there are is no risk because everything appears great is one of the biggest mistakes investors make and why they are always caught off guard. It pays to be aware!