Yesterday, we talked about the fact that the stock market has now enjoyed the longest stretch ever without experiencing a correction of 3% or more. We noted that the CBOE Volatility Index (aka the VIX) recently hit an all-time low and that volatility in general is the lowest in decades. It is also worth noting that the S&P 500 index is up nearly 15% on the year and that the venerable blue-chip index isn’t even the best performing index so far in 2017.
And yet, nearly every single financial advisor I talk to is worried about the stock market. They are worried about valuations, investor sentiment, a replay of 1987, what the Fed is going to do next, the state of tax reform, a meltdown in ETF-land, etc. In short, advisors fret that another bear market will turn their clients’ 401K’s into 201K’s again and appear to collectively be singing the refrain from The Who’s big hit, “Won’t get fooled again.”
To these folks, it is almost inconceivable that stocks could move higher from here. And yet, the DJIA closed at yet another all-time high yesterday. So what gives?
The answer, in my opinion, is that we’ve seen this movie before – several times. Stocks climb a wall of worry and continue to march higher for longer than almost anyone can imagine. Yep, that’s how bull markets tend to work.
In my experience, bull markets don’t end when everyone on the planet is expecting a bear to begin at any moment. The market doesn’t suddenly decline 30% or so just because valuations are high. No, as I’ve opined a time or two recently, bear markets tend to be “caused” by something. And right now, with the market on solid footing, there doesn’t appear to be a bearish catalyst on the horizon.
On the contrary, it’s actually the bulls who have the wind at their backs right now. And while I do worry that the following laundry list of positives for the bull camp might be a little too popular right now (meaning that a garden-variety pullback of 3% – 5% could occur at any time, for almost any reason) the bulls do seem to have a lot going for them these days.
