Daily All Time Highs

Now that the interest of the “cash under the mattress” crowd in the market has piqued, I wanted to discuss what market bottoms and tops actually are. First of all, no one can time the market.

At a market bottoms the numbers of investors have surrendered and are convinced that the market will continue to decline over the foreseeable future. At a market top, the maximum number of investors has joined the party and is convinced that the market will continue to advance indefinitely. Both bull markets and bear markets are supported and driven by stories with no basis. Everyone has opinon on the causes of the trends in stock prices.

The reason people are using to explain the current bull market is the Federal Reserve keeping interest rates at historical lows. This has forced investors to abandon fixed income for returns in the stock market. The S&P 500 now yields 2%; which is better than nothing. However, people are slow to change their beliefs. This is why most investors stay on the sidelines after they sold their stocks in fear at the market bottom.

The current bull market has been in existence for four years and the doom and gloom stories have always gotten the most press. Early investors are sporting large gains and the doubters are beginning to look like fools. The latecomers are the last to recognize that the positive story no longer holds water. That is why the average investor who is trying to do it on their own has very low returns.

Market tops stretch out over time due to the “buy on the dips”. These are usually the “I don’t want to miss the next upside” crowd. However, the first time the dips turn into a correction it’s back to cash. Therefore locking in their losses and missing the next upturn.

Today’s bull market reflects wide acceptance of the Fed story. When will this change is anybody’s guess. Stocks can go up further and longer than anyone expects. This is why I preach it’s best for the average investor to disconnect from his or her limited vision of the investment world and trust in a clear discipline, based on fact, with a very long history of success.

Bill

 

Advertisements

About billriley

Chief Executive Officer, Chief Compliance Officer A co-founder and shareholder, William Riley is a 33 year industry veteran, who observed, many years ago, that over time institutional investors typically outperform individual investors while accepting less risk. In his role as Chief Executive Officer, Bill works tirelessly to make the wealth management strategies used by the world’s wealthiest families and largest institutions available to our firm’s individual clients. Bill combines fundamental and technical analysis to minimize investment portfolio risk and maximize potential returns. He uses a variety of non-correlated asset classes, including alternative investments, to minimize portfolio volatility and seek absolute returns in down or flat markets. Finally, Bill believes in a comprehensive approach to wealth management that fully coordinates and seamlessly integrates portfolio management, risk management and asset protection, trust, estate, tax and charitable planning. Prior to co-founding Riley Wealth Management ,LLC, Bill held management positions at Merrill Lynch, UBS, Raymond James, Paine Webber and J.C. Bradford. Bill founded Fort Worth branches for Raymond James and J.C. Bradford. Prior to entering the financial services industry, Bill ran his families closely held businesses. Bill’s experience operating family businesses combined with his wealth management experience makes him uniquely qualified to advise entrepreneurs and business owners on a variety of matters including complex and sensitive issues relating to business succession. Bill’s degrees and designations included a Masters Degree in Business Administration (MBA), the Chartered Financial Consultant designation (ChFC), the Chartered Life Underwriter designation (CLU) and the Wealth Management Specialist designation (WMS). A Fort Worth native, Bill is a TCU alum and active in many civic and charitable organizations. Bill and his wife, Marsha, now reside in Colleyville, and they have four grown children and four grandchildren. When he is not working on portfolios or studying financial markets, Bill can be found on the golf courses of Ridglea Country Club.
This entry was posted in Uncategorized. Bookmark the permalink.