By Alan Steel
If it’s true, as Sir John Templeton wrote, that bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria, then by that measure this one may still be in nappies (diapers for the folks stateside).
And if the time of maximum pessimism is the best time to buy then the thinking just now might be to “fill your boots.”
That opinion, however, about where we are in this market cycle, is not widely shared, despite the record-breaking performances that have spread across quite a few major indexes for many moons now.
Some folks are calling it a secular bull that is both old and decrepit, and busily sunning itself through its golden years from the light of a few big stocks as it has done since about March 2009.
Others consider the market crashes within that eight year (plus) period, like the 21.6% S&P 500 drop from May to October 2011, and the recession-level peak-to-trough numbers in the US, Japan, China, and emerging markets (amongst others) from mid-2015 to early 2016 (details here), put the age of this bull at somewhere around 4.5 years, or perhaps just a year and a half.
Then there are the gloomier folks who, despite the long-term upward trend, positive corporate earnings, basement level inflation, low unemployment, respectable jobs growth, and historically low interest rates, habitually pick at the scabs of negative investor sentiment and draw dotted lines between now and the ghosts of recessions past.
These apostles of Joe Granville have helped position that latter category as the people’s choice.
As such, independent investor sentiment levels about the stock market are about as euphoric right now as a stomach ulcer.
Those feelings appear to corroborate the reason why we now have an Everest-sized pile of over $10 trillion that has accumulated in cash deposits stateside, along with the K2 and Kangchenjunga-sized pound and euro trillions sums on deposit in record low interest cash accounts in Europe and the UK.
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That’s a lot of money to not be working very hard for its owners – in fact some even refer to it as “investors sitting on the sidelines.”
And we can see by quantitative example the move away from stocks, as Chris Ciovacco of See It Market writes: “The chart below shows the trend of US household stock ownership between 2007 and 2016; it was not screaming “bubble” in 2016, and it remains that way in 2017.”
It suggests that record-breaking indexes don’t mean much to the masses, regardless of how old this upwardly mobile market might truly be, or in terms of its potential longevity against the average bull market run of about 97 months.
For me, I think the majority of investors are doing what they always do – waiting around for some kind of wonderfully perfect moment that will finally have built up enough financially fibrous scar tissue to replace the skin torn away by events like 2008/09, 2000/02, and even (for the oldies) way back to 1987 and its less memorable ilk.
Unfortunately, market nirvana is almost always either a day away or the day we missed.
So, when it comes to investing, perfect is always the enemy of good.
Just like the folks at Ned Davis and Pring Turner, amongst other solid research houses and contrarian market commentators, I think things are looking ok right now.
And while I don’t know what the future looks like, I’ll take good over perfect any day.