Face-burning rally
A remarkable story that deserves an entire day's workshop rather than a cursory blog post has been the rollicking bounce in US stock markets.
Having sunk below 750 in early 2009 the S&P 500 index went on such a storming run to above 2000 by late 2014 that many observers had urged caution (or in some cases simply warned of a catastrophic crash).
But these have been unconventional times, and after a couple of years of consolidation markets essentially went apeshit going into the early part of 2018.
As you can see in the chart below late last year the S&P 500 had its most concerted attempt yet at a post-financial crisis crash in dropping rapidly by 16 per cent from September's highs up until Christmas Eve.
Yet nobody predicted what would follow.
As the previously expected rate hikes turned to dust US stocks are up by a face-burning 16 per cent so far this year - the best start to any calendar year since the 1980s - and on a total return basis (i.e. including distributions) the S&P 500 has just hit a fresh all-time high.
Woosah...
Despite this wild rally markets are still expecting the Federal Reserve to cut over the year ahead.
Buy high...hopefully sell higher?
It's a truism to say that you should simply buy low and sell high.
But this elongated cycle is becoming a decent example of how it can be harder to do than it first appears.
But this elongated cycle is becoming a decent example of how it can be harder to do than it first appears.
For one thing markets are so darned unpredictable over the short run.
And for another, not everyone has the time or the patience of Job to sit around for five years or more waiting for the opportunity to buy cheap.
That's especially the case in an era of structurally low interest rates when cash in the bank is earning next to nothing after accounting for inflation (and all the more so in Australia where dividend yields can be considerably higher than the global average).
Spare a thought too for the more conservative fund managers or those with a value-oriented approach, with stonking growth being recorded across the tech sector and many so-termed 'growth stocks' through this cycle, all too often in businesses that have turned nary a dollar of profit.
When the clear-out does eventually come it could be swift and brutal.
When the clear-out does eventually come it could be swift and brutal.
