Investor Points of Few – A More Cautious View, Eight Bullish Years On

By Alan Steel

According to my calendar, today (Monday 6th March) represents the eighth year of the current recovery and secular bull that started this month in 2009.

So, for the sake of a solid reminder, the Dow Jones has since travelled upwards from about 6,600 to just over 21,000 points (as at 2nd March 2017):

Dow Jones 2 Mar 2017

The Nasdaq has likewise moved upwards from 1,290 to approximately 5,860:

Hasdaq 2 Mar 2017

And the S&P 500, and even the much-maligned and energy depressed FTSE, have also seen their fortunes rise to historic all-time record heights during that same time period; from 680 to 2380, and 3,530 up to 7,360, respectively:

S&P 500 2nd Mar 2017

FTSE 2nd Mar 2017

And yet…all the while this has been repeatedly branded as “The most hated bull market in history” – one ritually slated by the media and bear market celebrity analysts alike, avoided by investors for the perceived safety of bond funds that are at the end of their own 35-year-long secular bull, ETFs and absolute return funds (that generate anything but), and things like cash; despite returns being subject to the lowest interest rate environment in hundreds of years.

Maybe the most immediate lesson we can take from all this is that the herd is wrong – always wrong – and the consensus of opinion is like an enormous and almost cartoon-like arrow telling you to look the other way. 

Meanwhile, we’ve just gone through the longest period in the history of US markets without so much as a 1% daily move in the Indices.

Watch for complacency.

So what now? Should this be considered as one of the oldest and longest running bull markets in history, and standing on the precipice of disaster, or an average length bull run that only truly started at the end of 2013; when it broke through its previous peak prior to the 2008/09 recession?

Well, Ned Davis Chief Investment Strategist, Tim Hayes, is calling for bit of caution on equity allocations. Ignore that advise at your peril. Just last month they put their asset class recommendations where their mouths are by backing 5% off their equity allocations. 

He also makes some interesting recommendation on Europe, albeit from the US investor market perspective. My view is that most folks are underweight in that arena.

Equally interesting is the view from the Calafia Beach Pundit, Scott Grannis, and his note, Charts That Bear Watching.   Scott makes the point that:

“Stocks are certainly not cheap at current levels, but neither are they egregiously over-valued. However, it is reasonable to think that unless the U.S. economy picks up and corporate profits resume their long-term rise, the stock market is going to run into trouble at some point. Stocks are also vulnerable to an unexpected rise in inflation, since that would result in much higher interest rates.”

And, of course, what does the investor herd at large start to do the moment those with track records of success begin to talk about turbulence on the horizon? 

Well, Marketwatch has revealed a huge move over the last 12 months into equities; all of a sudden, after years of net sales into bonds.

Keep the lessons about following the consensus of opinion in the front of your mind at all times…and don’t do it.

Because after all, it’s your money.

Alan Steel, Chairman, Alan Steel Asset Management

Alan Steel 300 x 289

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