What a Difference a New Year Makes!
What a difference a year makes - at least in the stock market.
By this time last year, the stock market had crumbled quickly and suddenly. The pundits were scrambling to reassure everyone that the economy was strong - the usual damage control from those sagacious sources that typically know very little, if anything, about what's really going on. Given the severity of the fall in price, the possibility that this would be the start of a bear market, or at least the big correction everyone was expecting at some point, began to emerge quickly. At the end of the day, there was no bear, and whatever correction that occurred then or later in the year turned out to be more of a hiccup than a throw up.
As for this year, with expectations of a big correction still lingering out there, nothing of much import has happened. Stocks started weakly, bonds stopped falling, at least for a spell; even gold perked up a bit, having fallen back year end after a decent run in 2016.
While a stock market correction would not be a big surprise, the bigger story may be the bond market. Yet again, the word is out that the bull market in bonds that began around 1980 has finally ended. And while it looks that way now, it's looked that way on many occasions over a number of years. Each time it has, yields turned right around and headed south, which means the price of bonds shot back up. Will that be the case again? We don't know.
As for the economy, well, the same voices that typically keep telling us all is well keep telling us all is well. They will do so over and over again, if the past is any indication. What we need to understand is that they're basically paid to do that. First of all, if you're playing the odds, you're more likely to be right if you predict a good economy, just like you're more likely to be right if you predict a positive year in the stock market. So just to keep your job, you're likely to err on the side of good and positive.
Then there's the simple fact that Wall Street prospers when people are positive. Keeping them that way keeps the cash flowing into the stuff the Street sells. (As we've pointed out many times, Wall Street is basically a sales organization.) And since most of the economists who opine in the media are employees of Wall Street firms, you have to expect them to do their masters' bidding.
So where does all this leave us in this Year of Our Lord 2017? Well, not having any particularly special predictive powers that could provide any dramatic insight into the future, our fall back position would be allocating our assets such that we both protect capital (best we can), whilst exposing ourselves to those assets that might increase in value and give us an overall bump. In other words, we want to minimize how much we might lose while still leaving the door open to healthy gains over a reasonable stretch of time.
More on this in the weeks to come...
By this time last year, the stock market had crumbled quickly and suddenly. The pundits were scrambling to reassure everyone that the economy was strong - the usual damage control from those sagacious sources that typically know very little, if anything, about what's really going on. Given the severity of the fall in price, the possibility that this would be the start of a bear market, or at least the big correction everyone was expecting at some point, began to emerge quickly. At the end of the day, there was no bear, and whatever correction that occurred then or later in the year turned out to be more of a hiccup than a throw up.
As for this year, with expectations of a big correction still lingering out there, nothing of much import has happened. Stocks started weakly, bonds stopped falling, at least for a spell; even gold perked up a bit, having fallen back year end after a decent run in 2016.
While a stock market correction would not be a big surprise, the bigger story may be the bond market. Yet again, the word is out that the bull market in bonds that began around 1980 has finally ended. And while it looks that way now, it's looked that way on many occasions over a number of years. Each time it has, yields turned right around and headed south, which means the price of bonds shot back up. Will that be the case again? We don't know.
As for the economy, well, the same voices that typically keep telling us all is well keep telling us all is well. They will do so over and over again, if the past is any indication. What we need to understand is that they're basically paid to do that. First of all, if you're playing the odds, you're more likely to be right if you predict a good economy, just like you're more likely to be right if you predict a positive year in the stock market. So just to keep your job, you're likely to err on the side of good and positive.
Then there's the simple fact that Wall Street prospers when people are positive. Keeping them that way keeps the cash flowing into the stuff the Street sells. (As we've pointed out many times, Wall Street is basically a sales organization.) And since most of the economists who opine in the media are employees of Wall Street firms, you have to expect them to do their masters' bidding.
So where does all this leave us in this Year of Our Lord 2017? Well, not having any particularly special predictive powers that could provide any dramatic insight into the future, our fall back position would be allocating our assets such that we both protect capital (best we can), whilst exposing ourselves to those assets that might increase in value and give us an overall bump. In other words, we want to minimize how much we might lose while still leaving the door open to healthy gains over a reasonable stretch of time.
More on this in the weeks to come...
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