As all my regular readers know, yes I mean both of you, on Sundays I sometimes like to comment on the things that daze and amaze, astound and confound, the market games that both thrill and send chills down the spines of retail investors.
The 'Great Financial Crisis' of 2007/2008 is now 10 years in the rear view mirror. There are players in the market who were still in high school, or even elementary school when it happened. And that wasn't the first or only time we've seen a recession obviously. There was the 2000/2002 market crash that came when the 'Dot Com Bubble' finally burst. Before that the early 1990s saw interest rates explode into the high teens and low twenties. The world economy teetered during what was called 'The Great Recession', and some pundits suggested we were headed for another depression.
Boom then bust, boom then bust, boom then bust. That's the way the market works.
The broader markets have been on a tear, but obviously the bull will get tired at some point and the bear will come out of hibernation and take over for a while. Some think that we already hit that point in January of this year, when the market started dropping. The Dow went from over 26,000 to less than 24,000, it currently sits around 25,000
I don't think we're in a bear market yet. Even if I'm right though, one is coming at some point, and I think it could be starting as early as this summer.
The tax changes that were brought in this year by the Trump administration, I believe they will have a huge impact when companies start reporting their first quarter results for 2018. If I'm right I expect that stock valuations will explode higher as companies report record earnings. And if I'm also right on this count, then I expect that media talking heads to start proclaiming that the market is poised to go on a huge bull run.
If that happens, in my opinion caution is warranted. In fact, if it does play out this way I will be afraid. Contrarian investment strategy at its core means to be bold when the herd is afraid, and afraid when the herd is bold. Smart money players sell high while the sheep buys high. Why do the sheep get fooled? Because they listen to the news and follow the advice of market "experts". But that's the way it has to be, we all can't be buying and selling at the same time.
Not much more to say than that, happy Sunday everybody.
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