When the stock market is not going up, the blame game gets played. It’s a combination of shareholders losing money and media types needing something to say. It’s always someone or something’s fault and rarely described as a normal occurrence. The truth, however, is that yes, stocks falling in price is part of the regular cycles that we’ve always seen. In fact, stock markets that don’t have periods of falling prices are incredibly abnormal. 2017 for U.S. Stocks was the exception that proves the rule.
The reason I mention this is because we have not been in an environment where we want to be selling strength since early 2016. Many of you have been following my work for many years and remember my gloom & doom days of 2015 and even as far back as 2008. You guys already know that I’ll be bullish stocks when appropriate and bearish when necessary as well.
It’s important to recognize that the current market behavior is a normal part of this complex system. We don’t have to spend all day making up reasons for it, blaming the fed or the trump or whatever the gossip of the week may be. Looking for who to blame is a completely worthless academic exercise. What does it matter “why” stocks are falling? We won’t know for sure until 6-12 months down the road anyway, if ever. So who cares?
Recognizing that stock prices falling is a regular occurrence that needs no explanation in order to profit from it, is a huge advantage. Think about all the time and energy spent by so many looking for who to blame, instead of spending that time trying to figure out how to profit from it. To make things worse, I see people going out of their way to hear opinions of journalists and economists about why markets are not going up. I kid you not, sometimes people watch tv specials on sunday evenings, instead of spending time with their families, just to hear journalists make up reasons for why stocks are falling, when we all know it’s just perfectly normal behavior.
Five minutes of homework will show you very clearly that falling stock prices is just business as usual and needs no explanation. Here is a chart from First Trust showing market returns since 1926. Stocks fall in price. So what?
Forget about why. We want to focus on how we’re going to profit. That might seem like common sense, but you’d be surprised at how many people invite more noise into their office or home when in fact, it’s the time to be tuning the noise out even more. I don’t get humans sometimes. This is one of those occasions.
Let’s remember how normal it is for stocks to fall in price. And let’s not waste anyone’s time trying to make up reasons to justify it. This is just part of the regular process of the market. Let’s not pretend it’s not.
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