Korea's influence on the Stock Market
Returning to full-time work after an "easing back" on Easter Monday (a holiday in Europe, by the way, where markets were closed for the day). So here we are on Easter Tuesday being reminded of the whole North Korea thing and wondering if it's going to derail the stock market. After all, the threat of war can rip the heart out of any of that optimism about the future that underpins bull markets in stocks. This - even more so the mortal threat that nuclear attack brings with it - naturally makes the whole kerfuffle over North Korea's recent saber-rattling of its nuclear weapons something to keep an eye on. What might be the possibility of war involving the governments of - let's see now - North Korea, South Korea, the U.S., Japan, China...any other takers?
And yet, in a sign of contradiction, as European markets snoozed on Monday, the Nikkei held steady, even advancing slightly in the face of most other Asian markets slumping, albeit not by that much. Nothing catastrophic predicted by all that. U.S. markets awakened, after taking their Easter snooze on Good Friday, to negative futures in the morning, but quickly turned positive at the open. Can we learn anything from all this?
While political events can turn quickly and catch us off guard, we may be looking at a confirmation a continuing bull market in stocks, at least U.S. stocks. If we were on the edge of a looming bear market, it's likely the disturbing news from Korea would have knocked stocks for a loop. So far, that hasn't happened.
We add this bit of evidence to the current collection of intelligence that helps us discern what's going on now. The bucket of brains into which we tap haven't agreed on the current and near-term picture. But that shouldn't surprise, as we purposely seek contrasting opinions, especially those that disagree with whatever we're thinking at the moment. Keeps us honest. So here's what they've been saying lately:
Some of those esteemed sources believe the bear has begun to growl; others dismiss talk of a bear market as premature. Of those who hear the growling, one in particular provides specifics: We'll see a sharp correction towards the end of April (this before the Korean kerfuffle) - but that won't be the bear. The bear, if it arrives at all this year, will wait for some time towards year-end. On the other hand, of those who continue to envision a raging bull, the predictions can be breathtaking: Dow 30,000, 40,000, even 50,000.
I basically blanch with fear at the thought of investing in stocks when I consider the length of this bull market, the historically high valuations of stocks. Add to this the fact that seemingly outrageous predictions of exponential gains to come usually mark the top of any market, and you can understand the desire to stand aside. Then there's the fact that my "feelings" tell me not to get too close to stocks at this point. Of course, those feelings haven't always been all that prescient. Like a broken clock that nevertheless tells the correct time twice in any twenty-four hour period, those feelings have been correct from time to time - but not much more than that. So experience tells me not to weigh them too heavily. But we'll leave further discussion of the proper place for feelings in investment decision-making for another time.
For now, though, there's the obvious question: Who's right? The always frustrating answer remains: We don't really know.
However, let's note that one critical factor sticks out like a sore thumb: the lack of a general mania to buy stocks. That's usually the case in the final phase of any bull market. We haven't seen it. Fear still rules much of the general public's attitude and actions. As a result there's no rush into stocks. Every bull market with which we're familiar has always ended in this manic fashion, and not before.
Of course, there's one counter-weight to this: the trauma of the last two stock bear plunges in 2000-2001-2002 and 2008-2009. Such was the intensity of these collapses (the first persistently, lethally slow, the other shockingly, brutally fast), that a theory exists such that the general public will be out of stocks for at least a generation, similar to the generation that suffered the 1929 crash and subsequent Great Depression. If that's the case, there won't be any rush into stocks. So does that mean there won't be an end to the current bull? Or does it mean the current bull could end without the usual mania?
I do hate to say it again, but there's no ready answer here. It doesn't mean we don't continue to cogitate and/or contemplate. And perhaps a light bulb or two may pierce the cloud-cover lingering over us at some point. What that flash of inspiration might be, well, as Stephen Fry's Jeeves would have intoned in the great Jeeves and Wooster TV series, "I couldn't say."
Speaking of which, you might consider a few minutes respite from all the cogitating and contemplating with this scene from the series:
And yet, in a sign of contradiction, as European markets snoozed on Monday, the Nikkei held steady, even advancing slightly in the face of most other Asian markets slumping, albeit not by that much. Nothing catastrophic predicted by all that. U.S. markets awakened, after taking their Easter snooze on Good Friday, to negative futures in the morning, but quickly turned positive at the open. Can we learn anything from all this?
While political events can turn quickly and catch us off guard, we may be looking at a confirmation a continuing bull market in stocks, at least U.S. stocks. If we were on the edge of a looming bear market, it's likely the disturbing news from Korea would have knocked stocks for a loop. So far, that hasn't happened.
We add this bit of evidence to the current collection of intelligence that helps us discern what's going on now. The bucket of brains into which we tap haven't agreed on the current and near-term picture. But that shouldn't surprise, as we purposely seek contrasting opinions, especially those that disagree with whatever we're thinking at the moment. Keeps us honest. So here's what they've been saying lately:
Some of those esteemed sources believe the bear has begun to growl; others dismiss talk of a bear market as premature. Of those who hear the growling, one in particular provides specifics: We'll see a sharp correction towards the end of April (this before the Korean kerfuffle) - but that won't be the bear. The bear, if it arrives at all this year, will wait for some time towards year-end. On the other hand, of those who continue to envision a raging bull, the predictions can be breathtaking: Dow 30,000, 40,000, even 50,000.
I basically blanch with fear at the thought of investing in stocks when I consider the length of this bull market, the historically high valuations of stocks. Add to this the fact that seemingly outrageous predictions of exponential gains to come usually mark the top of any market, and you can understand the desire to stand aside. Then there's the fact that my "feelings" tell me not to get too close to stocks at this point. Of course, those feelings haven't always been all that prescient. Like a broken clock that nevertheless tells the correct time twice in any twenty-four hour period, those feelings have been correct from time to time - but not much more than that. So experience tells me not to weigh them too heavily. But we'll leave further discussion of the proper place for feelings in investment decision-making for another time.
For now, though, there's the obvious question: Who's right? The always frustrating answer remains: We don't really know.
However, let's note that one critical factor sticks out like a sore thumb: the lack of a general mania to buy stocks. That's usually the case in the final phase of any bull market. We haven't seen it. Fear still rules much of the general public's attitude and actions. As a result there's no rush into stocks. Every bull market with which we're familiar has always ended in this manic fashion, and not before.
Of course, there's one counter-weight to this: the trauma of the last two stock bear plunges in 2000-2001-2002 and 2008-2009. Such was the intensity of these collapses (the first persistently, lethally slow, the other shockingly, brutally fast), that a theory exists such that the general public will be out of stocks for at least a generation, similar to the generation that suffered the 1929 crash and subsequent Great Depression. If that's the case, there won't be any rush into stocks. So does that mean there won't be an end to the current bull? Or does it mean the current bull could end without the usual mania?
I do hate to say it again, but there's no ready answer here. It doesn't mean we don't continue to cogitate and/or contemplate. And perhaps a light bulb or two may pierce the cloud-cover lingering over us at some point. What that flash of inspiration might be, well, as Stephen Fry's Jeeves would have intoned in the great Jeeves and Wooster TV series, "I couldn't say."
Speaking of which, you might consider a few minutes respite from all the cogitating and contemplating with this scene from the series:
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