Oh what a difference just about four years makes. Today, the DIJA hit an all-time high, surpassing the former all-time high set in October 2007. We have come a long way, baby.
- Mar 9, 2009 – Since closing at its all–time high of 14,164.53 on Oct. 9, 2007, the Dow has lost nearly 54%. The Dow Jones industrial average lost 80 points, or 1.2%, to end at 6,547.05, its lowest point since April 15, 1997.
On that March day in 2009, the Dow ended a remarkable and scary slide, a one and a half year breathtaking slide. I remember it well …
For me, I take personal satisfaction in watching this achievement. For some four years now, I have railed against the doom and gloom crowd and my voice has consistently sung on the side of reason and rationality. I have not been alone. Although the breathless media continually gave the wild-eyed wanderers a high perch on the hilltop from which to scream, their loud noises could not match the force of the quieter voices that spoke of economic fundamentals and corporate earnings.
Okay, so we are still moving forward with momentum, but the headwinds, although slightly abating, are still a powerful resistance. The Fed, a sluggish economy, European debt, US politics related to US debt, and China all promise more volatility to come. But that is all it will be. For example, yesterday, global markets other than the US shivered at the news out of China.
- Plans to tighten curbs on the housing market in China and a slowdown in growth of that country’s services sector prompted worries about growth in the world’s second largest economy.
Today? Well, just read the opening paragraph of this piece. The China news came and went. It was so yesterday. Last night the Asian and European markets rallied on the news. Oh, speaking of the European markets, the seemingly moribund UK economy showed a bit o’ life in February.
- British retail sales grew at their strongest annual rate in almost two years last month, bolstered by dry weather and a rebound in demand for big-ticket items and household goods.
I know, I know, the market is still on shaky ground, despite the happenings today, but I still harken back to my brethren voices of reason out there, as well as my own study of current reality.
- Congressional Republicans announced a plan on Monday to avoid a government shutdown later this month, seeking to calm the waters after months of budget fights that ended in a failure last week to halt damaging spending cuts.
The US politicos will come to their senses. Their theatrics have grown tiresome for America, and that means the political wind has shifted. As well, the world economy is coalescing, as Europe heals and the emerging economies of Eastern Europe and South and Central America blossom. Oh, there are still the voices of doom out there, as the Fed is still buying some $85 billion a month in bonds to stave off economic falter. And there are those who still suggest the rapid market rise in 2013 is simply a harbinger of a large collapse.
- You’ll know it when everyone is optimistic, everybody is buying and nobody is selling, and when the guy on the street says ‘you should be buying stocks,’ that’s when you know you’re in a bubble.
Given today’s leap over the top, a more realistic occurrence is some slight euphoria followed by some decent profit taking.
- You’re better off watching for a tsunami than you are an earthquake because the lack of volatility usually indicates that it’s a matter of when, not if, we’re going to have a market decline of 5% or more.
Yup, the VIX is retreating back toward the low 13s as the Dow tops out. Expect a pullback somewhere in the near future. Just keep the advice below in mind, as you hear those voices of doom tell us the Dow will fall to 1,000. Oh, wait! They’ve changed that collapse to 2,000 now.
- If you can understand why the market is acting the way it is in the short-term then you shouldn’t get blindsided by a major move in the long-term.
By the way, if this rise today holds, the breathless media will feature those who will tell us today’s market crossing is a bad thing, but they will be a minor part of the positive song that same media will sing, at least momentarily. So, enjoy it.
Trade in the day; Invest in your life …
