It’s April 2017… whoa! 15 years ago, I was a newly licensed stockbroker working in Boca Raton, FL. The usual, pounding the phones, getting yelled at by my senior broker, and trying to survive. Oh, and having a blast in the sun and fun of South Florida.
Of course, at the time, the dot com bubble had burst and 9/11 had pushed the S&P 500 down 25%. The market dropped another 23% over the next year before finally starting it’s five year bull run. We are in for another pull back, as bad or worse in the coming quarters.
A 25% pullback will put the S&P right around 1,750. I don’t believe anyone should try to predict the direction of the market, but the more it rises over longer periods of time, the higher the likelihood it isn’t due to economic progress, rather to miss-valuation.
The cycle of capital has to play out, and “down swings” are a must in that process. Not to be pessimistic, but the future growth of stocks, overall, will be lower than it was in the past. Between 1977 and 1997, the S&P rose 725%; however, since then, it’s up only 188%. Of course, this doesn’t mean a damn thing long term since no one makes money backtesting, only by being right going forward.
From a business perspective, it’ll be interesting to see how the earnings of blue chips plays the rest of the year. I don’t think we’re in a bubble situation like 2008/09, but analysts have been speculating on Auto Loans and Student Debt as the next crisis and they’re not wrong. Only time will tell, but for right now, be careful. It’s better to be in cash and miss out on 20% gains than to be long stocks and lose 20% to the bear.