Help! Should I Buy Stocks Now or Run for the Hills???
“Zach! The oldest bull market on record just gained another 17% in the first half of the year… Can we really expect it to keep gaining? Should I run for the hills? Help!”
As we turn the calendar and roll into the second half of the year, I’ve gotten plenty of questions just like this.
Investors are concerned with the length of this bull market. And they’re also concerned about the strong performance in the first half of the year.
The market can’t go up another 17% in the next six months of the year, right???
Today, let’s address investors’ two greatest concerns.
Investors’ Two Greatest Concerns… Debunked!
Not so fast!
If you listen to these arguments and decide to step out of the market, you could miss out on some tremendous opportunities!
Here’s why I think these arguments are flawed and should basically be ignored.
Concern #1: The Strong First Half of the Year
Yes, the market is up about 17% from where it started on January 1st. And that’s an impressive return.
But do you remember what happened BEFORE January 1st?
The market traded sharply lower for weeks leading up to the end of last year. December was a scary month in the markets as traders bailed out of positions because of trade war and rate hikes fears.
So in the first six months of his year, the market was actually working on recovering these losses.
It’s not like we started the year at a new high and added 17% on top of that. Instead, the market simply repaired a lot of the damage done last year and only advanced to a new high by a few percentage points.
With that in mind, we’re not nearly as “extended” as you’re being led to believe. And so there’s plenty of room for the market to keep pushing higher in the second half of the year.
Concern #2: We’re in the Longest Bull Market Ever
The traditional way of measuring the length of a bull market is any period in which the market keeps going up without a 20% drop.
But my question is, what’s so special about 20%?
Why couldn’t it have been 18% or 25%?
The answer is that a 20% drop is just a rule of thumb. Or a human-created label.
And if that label was just a bit different. Or if just a few more sell orders had hit the market and sent it down just a bit more, we’d be talking about the NEW bull market today, instead of talking about an “aging” bull market.
Here’s the thing with stock market labels….
Just like in life, labels can be helpful in categorizing things by giving us a broad understanding of how things work.
But if used improperly, labels can be very dangerous! They can hurt us in society. And they can cause you to make bad decisions in the market!
So today, as we enter the second half of 2019, I want to make sure you’re not allowing the “aging bull market” or “too extended market” labels to keep you from making money.
We’re still in a very strong period for our economy. And there are still a ton of opportunities for investors.
I still want you to take a balanced approach to the market.
You need to be aware of risks, and it’s important to be diversified into different areas.
But to grow your wealth, this balanced approach should be weighted toward being more fully invested in times when the economy is growing and the market is trading higher. And that’s exactly what is happening right now!
So with this positive backdrop in perspective, let’s take a look at the 5 “Must Know” stories to get you started this week.
5 “Must Knows” for Monday, July 8th
Earnings on Deck — Earnings season unofficially kicks off next week with the major banks, but there are still a handful of major corporations reporting this week. On Tuesday, look for PepsiCo, Levi’s, WD-40 Company and Helen of Troy to report earnings. On Wednesday, look for Bed Bath & Beyond to report earnings. And on Thursday, look out for Delta Airlines and Fastenal to report earnings before the opening bell.
Powell Speaks… Investors Watch — On Wednesday and Thursday, Fed Chairman Jerome Powell will deliver his semi-annual Monetary Policy Report to Congress. As is the trend recently, investors will be paying extra attention to his report as they look for clues into the Fed’s next rate hike/cut decision. As of now, there is a 94% chance of a rate cut at this month’s FOMC meeting.
Amazon Workers Strike — Warehouse workers in Amazon’s Shakopee, Minnesota branch plan to strike on July 15th, the first day of “Prime Day.” William Stolz, one of the Shakopee employees organizing the strike, said, “We want to take the opportunity to talk about what it takes to make that work happen (referring to one-day shipping) and put pressure on Amazon to protect us and provide safe, reliable jobs.” This planned strike comes after the company promised at least $15/hour wages for all.
Morgan Stanley Turns Bearish — Morgan Stanley just cut its global equities allocation to the lowest in five years, and downgraded its investment recommendation to underweight, saying the outlook for stocks over the next three months looks particularly poor. This is why we here at The Daily Edge continue to recommend you stay diversified in investments beyond equities. Think bonds, real estate, and “Instant Income.”
Deutsche Bank Thins Out — Over the weekend, German banking giant Deutsche Bank announced that it will cut one fifth of its workforce and restructure its business in a move aimed at saving one of the world’s largest financial institutions. One false step could send a contagion effect through the EU economy similar to the 2008 financial crisis. So far, over 18,000 people are expected to lose their jobs.
Have a great week!
Here’s to growing and protecting your wealth!