Fortune Magazine's August 2018 cover features a cryer with a placard reading "The END is NEAR". It discusses the longest US boom in stocks, is coming to an end. As evidence, it is using indicators that have sometimes (often?) been used in the past to determine a coming drop in the stock market:
U.S. unemployment is nearing significant lows.
U.S. annual real GDP is dropping.
The treasury yield curve inversion is close (yield on short term exceeds the yield on long term treasuries.
The Federal deficit is ballooning.
Corporate debt is at all time high.
Oil has recently spiked.
Crucial Context: Wall Street analysts and industry pundits have never predicted both a drop and the timing of a drop.
So, what does this all mean? Mostly nothing.
The economy follows a standard pattern: expansion, peak, contraction and trough. Are we headed for a peak and contraction ... certainly. But that should not affect your investment patterns. Because an expansion will be just around the corner. And nobody has proven adept and timing the markets.
If you had sold at the top of the Oct 2007 and then waited for opportune buying times, you might have missed the 30 best days of the last 10 years. And if you had missed those 30 days? You would have realized a net loss of .9% ... as opposed to the 7.2% annual return, had you stuck it out and bought throughout that time.
So rest assured, a contraction is coming ...
...but don't worry, what follows will be an expansion. Continue to buy the best companies in the world at a discount throughout the process.
Are you mentally prepared for the coming drop?
Are you invested in a way that will cause you to run for the hills? Do you have an appropriate risk strategy that suits your style?
Let's talk if you need a second opinion on your portfolio.