The bull market in US stocks that began in March of 2009 is now seven years old. This article from Bloomberg shows some of the winners and losers over that time frame. I think the most interesting piece in this article relates to “fund flows” – money has moved out of US equities roughly since the beginning of 2015. I think this reflects the negative sentiment we are seeing on Wall Street.
When sentiment gets too “one-sided” you often see a move in the opposite direction. Last month was a perfect example – not only was everyone bearish, but they were extremely bearish. “Recession looming”, “the FED has lost control” and “2008 style market crash imminent” were phrases used in all forms of media. What happened next? A 10% rally in the S&P 500* over the course of the last three weeks.
When markets are collapsing I typically encourage investors to stick with their plan and not panic about the issue de jour. You make money in the stock market by buying low and selling high – not the other way around. If you are a long term investor, the key is to not panic (sell) when the markets are panicking and make your portfolio adjustments when the markets give you the “all clear ” sign. There ARE many risks out there today – a China slowdown, Brexit, interest rates, currency wars and collapsing commodity prices are just some of the many risks. After this large move to the upside in global equity indexes, now is a great time to prepare your portfolio to face these challenges.
*Return numbers are from Morningstar.com. Past performance does not guarantee future results.