“Most of the things worth doing in the world had been declared impossible before they were done.” ― Louis D. Brandeis

The next earnings season is upon us.  

Good Lord, it seems like no more than a week has passed since the last earnings season which, for reference, beat analyst’s expectations on over 80% of announcements.

Long-time readers will know that we prefer to see some market setbacks before earnings season begins. That’s because it tends to set the stage for near-term upside surprises and the oft noted, "hmm, that's better than we thought it would be..."

While I suspect we will hear a good deal more of that in coming weeks, the price action is suggesting we could chop a bit.  

Let's be clear, in the near-term that would be a good thing. 

And while money has not yet been shovelled into the market, sentiment has improved. They are still speaking with their "feelings" and not yet with their money as trillions remain idle in the bank.

Personally, I prefer the herd remain uninterested in stocks. 

That said I would not be at all surprised to see some headwinds here for a few weeks. 

But we should be praying for corrections, as we have very few of them left ahead over the next 30 years or so, give or take a decade. 

Speaking of Corrections

While I have zero insight as to when the next "crash" will hit, we remain intrigued with the number of experts who are eager to point out risk 100% of the time, presumably to remain out of the market and stay in cash for years on end in order at some point to say "I told you so," when the next sell-off inevitably occurs. 

Market crashes happen, which oddly enough is a very good thing.  Market setbacks create the spring-coiled effect where solutions that vanquish the latest market monster hurl prices upwards.

Keep in mind the historical frequency of pullbacks identified since 1928, while appearing to take up most of the thinking and planning amongst investors are, in reality, thin on the ground:

Over the past 50 years, the S&P 500 benchmark went through:

• 26 market corrections (declines of 10% or more, see below) 
• 6 bear markets (declines of 20% or more, highlighted in red), and, among them, 
• 3 market drawdowns of more than 40%. 

That’s it!

Another view of this "volatility" is from the latest highs as those 50 years unfolded:

Pretty Dicey Indeed

That appears to be a pretty rocky road if you get too lost in the scary sounding data.  

So, why do I refer to it as getting lost?

Well, while all the terribly frightening events over the last 50 years were keeping trillions of dollars "safe" in the bank due to emotionally charged, reactionary "investing", the markets did this:

The key word in that last sentence is "while."

Ignore the News

Yep, there’s another crash coming. There’s another correction coming. And the next 50 years will very likely look at lot like the last 50 years.

But worrying about a crash is not a symbol of "outside the box" thinking or even a slightly contrary view. 

Here’s the latest "Crash Confidence" view from Yale data:

The individual investor today is now more worried about a crash than they were at the GFC lows in 2009. That was 24,000 Dow Jones points ago!

The Next Monster

You will often read here that there will always be more monsters.

As the changes of the decades ahead accelerate, we must accept this process as a game to play and a necessary evil.

Just keep in mind that:

• Every challenge of 2020 made us stronger. 
• Every setback of 2020 made the future reward for the patient investor better and broader.  
• Every bad headline of 2020 hid the new horizon ahead from too many.

Stay focused on your pathway.

The future is much brighter than your currently being told, and the decades of disruption ahead will bring massive opportunity.