The broad stock market indicators like the Dow Jones Average and the S&P 500 Stock Index reached a low point in March 2009, near the end of the financial crisis. Looking back a year or four years or seven years later, hindsight showed that the crisis was potentially a great buying opportunity.
Many investors missed out on the multi-year rise, however. (Or should they be called former investors?) In real time, nobody ever knows what will happen next, particularly in the short term. And rising markets, or ‘bull markets’ as they are known, seem to have many disguises.
After a rebound begins from a long decline, inevitably some pundits label the rise with an overly colorful phrase, “dead cat bounce.” The implication is that, while there might be a bounce, it certainly won’t go very high or last very long—the market is going nowhere.
Next comes the idea that if buying has produced a slight turnaround, it is just “short-covering.” This means that speculators who profited from the drop are now booking their profits, reversing their positions. Supposedly, there are no ‘real’ buyers.
When the market persists in the upward trend, the next excuse might be that “the market got oversold.” Therefore a temporary bounce is to be expected, before the market slumps again.
Then when the next slump fails to show, pessimists start saying things like, “We can’t know we are in a new uptrend unless the market reaches new all-time highs.” Or “It has gone up too far, too fast.”
When you take a step back and look at the big picture, those poor pessimists never could get back into the stock market. They had one rationale after another to doubt the recovery; meanwhile the market went up and up.
Do not worry about the bears, however: they have a new story. “The market is too expensive.”
Fortunately, we don’t buy the whole market anyway—we seek the bargains. You can read about our current strategies in this article. If you would like to talk about your portfolio or situation, please write or call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.