The current bull market in stocks reached its 8th
anniversary last Wednesday, and for about the last four years, professional investors and financial planners have been scratching their heads. The markets have gone up and up and up, and we all know that they won’t go up forever, which means there’s a correction looming somewhere on the horizon.
The problem is that the wisest professionals generally know what a market top looks like—and what it doesn’t. For most of those eight years, investors were constantly looking over their shoulders, waiting for the next shoe to fall, being very cautious about their stock allocations. As long as that generalized anxiety persisted, it was unlikely that we would see the exuberance and overconfidence that typically precedes a major market decline.
The markets generally top out when the average person starts feeling like he or she is missing out on future returns. Suddenly money that has been on the sidelines for years starts to flow back into the market, causing it to rise faster than it ever did during the buildup early years of a bull market. You start to see pundits, touts and market prognosticators get really enthusiastic. Nobody could see any sign of that swell of overconfidence—
Until now, with what Wall Street has been calling The Trump Trade. The trade means that people everywhere are investing in anticipation of lower corporate taxes and fewer regulations.
An excellent description of how to spot a market top was published on the MarketWatch website, entitled “7 Signs We’re Near a Market Top, and What to Do Now.”
What are the signs? The first one is... Read More >