Dear Mr. Market:
First and foremost, what is the proverbial “wall of worry”? If bad news is bad…why is it that good news (or even mildly good news) … is also perceived as being ‘bad’?
Granted, this is not always the case but it certainly is now. What is the “wall of worry”?
DEFINITION of ‘Wall Of Worry’
“The financial markets’ periodic tendency to surmount a host of negative factors and keep ascending. Wall of worry is generally used in connection with the stock markets, referring to their resilience when running into a temporary stumbling block, rather than a permanent impediment to a market advance.”
Two weeks ago we were in Chicago for discussions with analysts, economists, and elite portfolio managers. What’s interesting is that the majority of the investing public is living in fear and at their utmost pessimistic levels of recent history, yet the underlying economics and pure fundamentals of the stock market actually counter such negative and extreme doom & gloom sentiment.
If you’ve read anything we’ve published over the past three years we clearly explained this day was overdue and would eventually arrive. It should be no secret that a market correction (technically defined as -10% or more) was coming. If anything, we were too early in pounding the table about this impending reality. On average, stock market corrections occur roughly every 20 months. Since 1945, we’ve had 27 market corrections of at least -10% or more. Of those 27 times, the market averaged a -13.3% decline which lasted about 71 days to fully play out.
While we’ll admit to being cautious earlier than most, we did nail the most recent “non-decision” by the Fed to not increase interest rates! Why is this important? Anyone with a smart phone, TV, or newspaper could tell you that the Fed is eventually going to raise rates. “Experts” looked really smart making that prediction because it seemed obvious. Where are they now? Yep…silent….or pounding their fists now for an October rate hike. (they will eventually get it right one of these times!!).
Well…they were ALL wrong. In our summer newsletter we stated rates would NOT rise in September. Are we clairvoyant? No…but why not learn from our playbook right now? Not every major economist or media finance expert will get this right. In fact, most get it wrong for the simple reason that they are human and the last time we checked…ALL humans are emotional beings. This market has you upset and the same goes for the “experts” that are trying to influence your investment decisions.
What you need to do right now…in other words… immediately…is to tune out ALL of the media. You’ll be a better investor the second you do it! If you don’t …you’ll repeat mistakes like thinking the Fed would raise rates in September. They had to raise rates… right? Slam dunk! No doubt! 17 of 19 Federal Open Market Committee economists said it would happen. Done deal.
Nope. Didn’t happen.
If your investment time horizon is longer than five minutes; let’s say five years…or even 10…. Take out your pencil out right now and start jotting down leading company and industry names that you want to own. Get your shopping list ready! If you need help completing your list let us know as we would be glad to help!
The time to buy is not when people tell you to…. It’s when times supposedly stink and you should build an underground shelter for when the sky is falling. Turn off your TV and let’s chat next week… Build out your shopping list and in the next 10 years you’ll not only be smarter without the media clowns…but much richer.