Is the Stock Market Headed Higher or Lower?

Dear Mr. Market,

tightropeHere we are…now what? You reached an all-time high this week with the S&P 500 breaking the previous record of 1,565 set in October of 2007. Congratulations! Although you’ve taken today off for Good Friday, here we sit at 1,569 and everyone is wondering …”what’s next?”.  Will you break out to even higher levels or is the expected correction that everyone is talking about becoming more and more of a given?

We ask you these questions because it’s times like this when many investors make critical decisions. Passing historic levels in the stock market can be more than just a headline. For some it’s a time of reflection and it allows the investor to see where they’ve come from since the last bear market or how they’ve done since the last time the market was this high. Breaking new highs shouldn’t be the trigger that tells an investor to reassess their strategy though.

Since nobody we know has a crystal ball, what we really want to know is how most investors are feeling in light of reaching these levels. Humans have a natural fear of heights. As a market gathers steam and prices rise most investors welcome that and typically “feel” good. A different feeling then creeps in when new levels are reached. Investors then believe with each new high that a reversion to the mean will occur and the market is bound to correct. Sure, the “writing is on the wall” and just about everyone we speak to thinks (feels) that the market will correct soon. This opinion is held the most by those that either have not participated in the recent market run-up or those that perhaps are trying to sell a different vehicle. Continue reading