It’s Just Emotion…
Somehow it seems hard to believe that we’ve made it to the summer of 2019.
Well. Look how far we’ve come given the way we ended 2018.
Or had you forgotten what the future was supposed to look like at the beginning of the year?
It was bad, really bad:
- Earnings were going down – but they didn't.
- Recession was here – but it wasn't.
- China was going to wipe us out in the Trade War – but they won't.
- The US Federal Reserve was going to strangle us with four more interest rate hikes – eh, not even close.
- The market was going to hell - but it hasn't.
And then, hell froze over.
Above all that fake noise, the market rallies from 21,700-ish to about 25,400 (at the time of writing).
Yep, that’s the truth of the first half of 2019, in the midst of the cold winter brew the media had you drinking.
Folks, what you’re watching in the media is almost entirely fake. Think of it like a movie set; it’s just painted cloth backgrounds, earnest faced actors and the cameras are always rolling.
Just the Facts
I’m going to share some images (below) to help you empty the emotional baggage collected from the low’s way back in 2009, which still shapes the majority of investor thinking - and the daily financial news reels.
They also show you the real cost of these misguided emotions, and equally, the value of sticking to the facts.
Let's start with the latest from AAII - and all those bears:
“You will find only what you bring in.” Yoda
As Yoda points out, if you come in afraid you will leave only seeing things to be fearful of.”
The chart above shows us that we’ve reached regions of fear where 3 out of 4 people in the audience no longer like the stock market.
That's excellent news for long-term investors.
As for the red star, well, it’s showing you a point of mortal fear known colloquially as ‘The Brexit’.
Now, if at this point you’re laughing your ass off, then good, because that’s also what you’ll be doing five years from now when I point out all the fears that made up ‘The Trade War with China.’
And even as Britain’s Prime Minister has now resigned, a powerful new ‘Brexit’ political party has emerged in the last six weeks, the markets have simply moved on.
I’ve added the light pinkish arrow back in 2009 when we were at Dow Jones 6,700, the world was ending and the global economy was screeching to a halt, to highlight that the sentiment reading was 19.7. That’s a mere 5 points away from where we are now, despite the Dow Jones having since moved all the way up to 25,400.
Last but not least, have a look at the dark purple arrow back at the start of 2018.
The blue line then shows that the audience was extremely excited about things and felt pretty darn good I might add…only after a 5-year run for the markets.
The key word there is ‘AFTER’.
In other words, they missed it while being busy with their own negative emotions instead of looking at the facts.
And here we stand, at nearly the exact same price today, but investors are as fearful as they were in 2009?
Are you kidding me?
Get a grip, folks, it’s just emotion.