Everything is just fine… right?
March 2, 2014 7:00 amThis week we’d like to continue our theme of reviewing thoughts from some of the best thought leaders in our industry.
Jeremy Grantham is another leading money manger. He was asked what people would learn from the whole 2008 crisis. His answer has become a pretty well-known quote by now: “In the short term a lot, in the medium term a little, in the long term, nothing at all. That would be historical precedent.”
The basic idea in this case is simple: when things have been going well for so long, most people end up letting their guards down under the false notion that there are no more risks out there and nothing will ever go wrong again. Or at least not anytime soon…
The prevailing mindset for many at the moment is that the domestic stock market is back to full-strength. Many money managers are investing like the markets can do no wrong… This creates the illusion that all that pain is behind us, fixed, and there is nothing to worry about. This view is built on some solid recent results: Since June of 2012, the S&P 500 market is up over 40%… and during that time frame the S&P has not had as much as one 10% correction. Wow! That kind of straight shot up has a way of fogging people’s memories. Strangely, we all look back at the 2007 peak and see that most stocks were overvalued… but with the S&P is almost 20% ABOVE it’s 2007 peak the narrative all over the business and financial channels is we are just beginning a new bull market… Really?
It’s been said that “the stock market makes the headlines,” so it’s no surprise that most of the mainstream economic news is pretty rosy. In fact, if the stock market is your indicator, your conclusion would be that the US, Europe and other developed economies aren’t just doing well, they’re in the best shape they’ve ever been in.
How are you feeling about the markets? Are you as confident today as most of the money managers were in 2007? Are you concerned that your strategy has too much focus on an overvalued stock market?
We’d love to explore alternative vision investing with you.
Categorized in: Blog
This post was written by Conscient Capital