This is not a bull market. This is not a bear market. This is a bunny market. It hops up and down but doesn’t go anywhere.
At least this is what Jim Paulsen, of Wells Capital Management suggests. And I think he’s right. At least for now.
We have a fully valued stock market. There are no strong drivers to move the market ahead. And we’ve got an election year cycle in the works. So until we’re past that election or other strong market drivers kick in, volatility is probably here to stay for a while. Hop, hop, hop.
I don’t know about you, but I’m getting tired of this. This bunny market has been going on for about a year and a half now, looking at the S&P500 index alone. And for more diversified portfolios it’s been going on even longer, due to the relative underperformance of small caps and global markets.
So why stay in this market?
Things will change at some point. We want to be in the market when they do.
And there is no recession looming. As I have mentioned in my last two newsletters there is currently no fundamental economic reason for there to be a serious long-term draw down in the markets. Economic data is mixed, and things can always change. But most serious economists, including those at the non-profit economic research group, “The Conference Board,” agree that the economy should continue plugging along this year. And markets will follow at some point.
Finally, remember if you’ve invested with me your portfolio was designed with your risk tolerance in mind, and your plan was designed with expectations of periods of volatility.
So don’t be afraid of the bunny market. Don’t make the bunny bigger than it is. It may be frustrating to watch the bunny hopping around in your garden for a while. But bunnies are nothing to be afraid of, if you just recognize what they are.
If you would like to discuss this article, please call Greg at 316-440-2550.
