Last month, volatility returned to the market. It had been a while – 13 straight months of positive returns will do that.
Some think it’s a sign of future doom and gloom. Others think it’s a minor course correction on an otherwise solid path.
I see reasons for both points of view.
On the positive side, there’s no doubt the economy and market are humming along. The recovery that started almost nine years ago is one of the longest ever, and the positive effects are global.
Plus, with the new corporate tax cuts and President Trump’s penchant for deregulation, business investment is beginning to hit high gear.
Conversely, interest rates seem to be on the rise, we just aren’t sure when or how much. And when combined with stock valuations that are at all-time highs, it’s no wonder investors are absorbing more risk to achieve their desired returns.
Investors’ fear of missing out leads to aggressive investor behavior across the board. And often times as a result, it leads to regret.
In the end, some people are excited by the fundamentals, while others are worried about prices.
Which opinion should you weigh more heavily?
Well, the easy money has likely already been made – the S&P 500 has quadrupled since 2009! And future returns aren’t forecast to be anything spectacular.
Caution is often the sensible play, and that’s probably the right path now.