Form The Reformed Broker: Why Bull Markets Make Everyone Miserable
There’s also performance envy, fear of missing out (FOMO) and a whole litany of cognitive issues revolving around whether or not each of us has received our fair share of the bull market. Spoiler alert: No one thinks they have, regardless of how much they’ve made.
FOMO has become acutely relevant in post-2013 society. It’s a real thing. Centuries ago, people had FOMO over not going to heaven, but now it’s FOMO over missing out on the stock market.
No one you’ll talk to believes that we “deserve” to be here, given the upcoming election mess, the state of earnings growth, continued uncertainty about the Fed and economic growth, etc. Add in the ever-present discussion around the effect that buybacks are having – “they’re propping up the market!” – and you get the sense that sentiment is as bad as it was 13% ago when a full-blown bear market was in sight.
The left has been saying this for years to justify why the market should not be so high, and they keep being wrong as the market keeps making new highs. The PE ratio of the S&P 500 is still only 15-20 (depending on your source), which is still far from bubble territory.
This is not the same as saying they’re not buying. They are buying. They have to buy. It’s their job. The modern world of asset management is a Roman trireme; the benchmarks beat the drum and professional investors row like mad to keep pace with the drummer’s rhythm, lest they feel the whip of redemptions across their backs. We’ve been rowing at “ramming speed” all spring, our heads bowed to the task, our expressions mirthless.
They are also buying because the underlying fundamentals – profits & earnings – are strong, despite all the doom and gloom headlines. Companies like Disney, Nike, Google, Microsoft, Facebook, Walmart, and Johnson & Johnson are printing cash quarter after quarter and don’t care about whether Trump or Hillary becomes president, the latest media-generated crisis or scandal, whatever is happening in Russia or the Middle East, or if wealth inequality is ‘too high’.
If you’re doing any kind of hedging or risk management or even diversification, the longer a bull run continues, the more of a schmuck you look like. A seven year bull market like the current one makes all responsible investors look schmucky to some extent.
Suffering can be lessened by staying away from bad investments and sources of misinformation. I’ve seen enough doom and gloom on the internet (sites like Zer0h3dge) to know to ignore it, because it’s wrong 95-99% of the time. America is still the best> place to invest, despite all its problems.