The Most "Hated" Bull Market 

 

Last week, CNBC did a story on why investor sentiment and public opinion regarding the viability of our current bull market cycle is so poor.  As this bull market moves forward into its sixth year, some point toward historical data that reveals that these cycles rarely last for this long; and that data alone is the primary reason some claim that this market is so unattractive or hated by investors at this point. I don't buy that.

 

Here are 7 reasons that this positive market cycle is so hated by many:

 

1.) Most economic recoveries that create bull markets usually bring back the jobs that were lost at similar wages (or higher); this one brought back more jobs, BUT with a huge reduction in wages.  No one likes to work for less than they once did.

 

2.) Most bull markets have led to INCREASING WAGES and higher standard of living for a larger percentage of our US population.  Due to globalization and U.S. corporations ability to replace people with processes, ONLY A FEW (as a percentage of our population) are earning more than prior to the Great Recession of 2007-08.

 

3.) Investors that root their investment decisions only in traditional valuation techniques, and/or traditional economic models to forecast improving / declining economic conditions have to be upset because no traditional measures can account for the game changing monetary policies that our Federal Reserve has installed in the past 4-7 years.  In essence, investors may be angry because they are not in this market because traditional buy / sell rationale would not have led to a resounding buy trade on stocks.

 

4.) Much of the wealthy middle class in America was spoiled on unsustainable lifestyles while corporate America and the banks leveraged up before the Great Recession.  Having lived in that "easy money / cheap credit" era, a large segment of our population may feel slighted as they were operating under the assumption that that is how things would remain for the long run.  Now, since leverage is used only sparingly due to much higher lending standards, this segment of our population lacks confidence to invest in this market, and most certainly would be upset if they have missed out in returning their personal wealth back to pre–recession levels.

 

5.) Senior citizens and folks living on fixed income feel the results of modern day Federal Reserve policy;it angers them to think that they will have to spend more for the same goods and services so long as central banks around the world continue to enact inflationary policy (excess money printing) to keep asset prices up.

 

6.) Environmentalists cannot be all that happy that one of the largest sustainable drivers of our current economic recovery (and the current manufacturing renaissance in the U.S.) is the energy evolution.  Many people are not comfortable about the environmental impact of fracking and the continued expansion of our energy economy.

 

7.) A large part of our population is now reaching an age that their capacity for market risk is lower, so prudence suggests that they do not participate in this bull market- especially now since the "easy money" has been made.  This can be very frustrating to our baby boomers.

 

There are other reasons to hate this bull market, but these are some of the big ones.  
The questions become:

 

What are we going to do in this environment?

When does this bull market sputter out?

What are the risks for investors today?

 

We have some good ideas on how to answer these questions.  We hope that you will join us for our Q3 client call scheduled July 15th or our live mid-year market updates July 14th or 15th for our thoughts on these big questions.

 

Bottom Line: Emotions are a big factor that contribute to the success or failure of an investor. Although there are many reasons for people to "hate" this bull market, it remains important for investors to keep focused on what drives earnings, not how we "feel" about the world. 

June 2014

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