Persistent Worries … Persistent Gains
“Given the big run that stocks have had, it’s probably a good time to sell.”
I recently heard this at a holiday party, but what struck me was how often I’ve heard the same thinking over the last 5 years … only with a different catalyst.
There seems to be plenty to worry about these days. Richard Bernstein Advisors recently published the latest list of fears.
Personally, I like the “tongue in cheek” grouping of some of the fears they cited, including:
- Companies aren’t hiring …
- … wage pressures are spreading
- The Fed’s actions will cause inflation …
- … deflation is spreading from Europe to other countries
- Corporate taxes are too high …
- … corporate taxes are too low
The short report concludes that none of the 30 fears cited has materialized since 2009, despite the “breaking news” and 24/7 media coverage. More importantly, the S&P 500 Index has gained nearly 16% annually for the 5 years ending November 30.
Should investors fear nothing and simply invest? Of course not. However, history tells us that bull markets typically form when fears are escalated, asset prices are depressed, and sentiment is gloomy. These same bull markets end when the opposite conditions are true: Little fear in the markets, rich asset prices, and optimistic sentiment.
Many investors know the saying, “Be fearful when others are greedy, and greedy when others are fearful.” The trick is having the confidence and discipline to act on that thinking.