As the markets finish off the first period of significant correction in this new bull market, the underlying indicators are once again showing impressive strength building on the buy side. Volatility is also increasing, which is to be expected at this stage, making it emotionally harder to hold on to stocks but also rewarding for those who do. As stocks rally higher, the perception of risk is likely to change. Coming out of the 2008-2009 bear market, the definition of risk for most investors is what they most recently experienced, fear of loss of principal. Except for the rally in the last months of 2017, trading in the stock market was slow and the volatility was low, reminding us of the trading in the first half of the 1990s. What we believe is about to transpire is a very strong, volatile (mostly to the upside) rally that is similar to the mid-1980s, which also happened to be a second major rally following the bear market ending in 1974.
We had more clients and friends ask about preparing for and the, most likely, market reaction to, this election than any other in our careers. Certainly, there will always be short-term, limited, knee-jerk reactions to such big events. But the thing most people forget is that the market is a discounting mechanism and uses many different sources of information to trade on. No matter your political belief, we are still in a free enterprise system that is largely governed by market forces. This means the market has already priced in such an event and its relevance to commerce before the outcome has been decided. So, our answer to the aforementioned questions had to be, the market is poised to continue its primary trend up, regardless who wins.
We sincerely hope you and your loved ones are safe and healthy and hope you get to spend some time, in person or virtual, with them over the Thanksgiving holiday.
Gary and Dianne
This report is provided as a general market overview and should not be considered investment or tax advice or predictive of any future market performance.
Any security mentioned in this report may not be suitable for all investors. No investment mentioned in this newsletter constitutes a recommendation to buy, sell or hold a particular investment. Such recommendations can only be made on an individual basis after an assessment of an individual investor’s risk tolerance and personal circumstances. Past performance of any investment mentioned is not a guarantee of future performance. Statements regarding the investment concerns and merits of any company and fair market value computations are strictly the opinion of Marin Group. Employees of Marin Group and Marin Group clients may have positions and effect transactions in the securities of the issuers mentioned herein.