When we are looking at the high points in the market, the word that gets thrown around is "euphoria". Euphoric investors buy too high, hang on thinking there is no ceiling, and are consummate bulls. On the flip side, when the markets are trailing lower, we look for "despondency", or when all hopes seem lost. It feels like we are getting pretty close, but inflation data needs to settle and tick down, economic strength needs to sustain, and unemployment needs to remain low (aka – staying away from stagflation). This is why interest rates and the Fed talk have been hyper-relevant.
We don’t know how long this will last, but let’s take a common-sense step back. The further we look out, the more positive our outlook is even with this short-term misery we are feeling. We are through the pandemic, unemployment is low, corporate profits are still strong, technology has made things cheaper, and global supply chains can only get better. With all of that, it’s not unfair to be concerned right now. The concern is rational, but the selling in the market has become irrational. Additionally, we have to remember we are coming off of a hot market from last year and this is normal, as uncomfortable as it feels. It feels like there are few places to "hide" with bonds and stocks both feeling the pains of the market, which feels a bit like despondency to me.
Spring is here, warm weather is returning to the Northeast, and good times are ahead. These are usually times when the emotional lose money, and the steadfast make money. Let’s stay steadfast as uncomfortable, or despondent, as it may feel.