By Eric Fry
Editor’s Note: Want to hear a joke?
What do you get when the Dow drops 666 points on Friday, another 1,175 on Monday and then ends 567 points up yesterday?
A big “nothing burger.”
Okay, I don’t want to be totally dismissive – maybe more like “nothing sliders.”
If you’ve been following the strategists at Investment U, you know that the recent volatility in the market is not akin to the dot-com implosion of 2000 or the Great Recession of 2008.
For starters, the economy’s fundamentals are strong – very strong. As fourth quarter earnings continue to come in, more than 75% have beaten Wall Street’s expectations.
Unemployment is low, wages are rising (as are interest rates, which isn’t a bad thing considering we’ve been at near zero for a decade) and Trump’s tax reform is taking hold – I hear a new story almost daily about yet another company planning to invest more in its business or give its employees surprise bonuses.
Today’s guest contributor, Macro Strategist Eric Fry, wrote last week about market volatility. He believes that the market is likely correcting for some of the more recent speculative greed that’s caused its value to artificially inflate.
So the moral of my note today is to remain calm. We here at The Oxford Club believe this will all shake out and possibly provide some great value-buying opportunities in the weeks and months ahead.
By the way, if you want to tell a really good joke, use one that starts with “A priest, a rabbi and a kangaroo walk into a bar…” And if you want to hear more from Eric Fry, click here.
– Donna DiVenuto-Ball, Managing Editor
Greed isn’t always good. Sometimes it’s a very costly impulse. The present moment may be one of those times.
Greed seduces; it never promises. Sometimes its seductions deliver a satisfying result… other times, not so much. That’s why greed is such an unreliable investment partner… especially when greed’s guidance is pointing toward a “sure thing.”
The more an investment seems like a sure thing, the more likely it is to disappoint, if not utterly fail.
In the world of investing, we call greed “bullishness.” The opposite sentiments of caution and fear are called “bearishness.” Whenever either one of these sentiments reaches an extreme among the investing public, the stock market typically reverses course and heads in the opposite direction.
In other words, investors tend to become extremely bullish at major stock market peaks, just before a sell-off begins. And they become extremely bearish at major stock market bottoms, just before a new upswing begins.
These patterns have repeated themselves over and over again throughout the long history of financial market booms and busts.
At first blush, it may seem confusing and counterintuitive that extreme bullishness would precede a sell-off. But actually, this phenomenon is fairly straightforward.
When investors lack fear, they also lack caution… and when they lack caution, they take risks. The longer those risks pay off, the more invulnerable they feel.
The more invulnerable investors feel, the more complacent they become – until the …read more
Source:: Investment You
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