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One look at the daily chart of the S&P 500 Index will tell you that something odd is going on. After the S&P finished its last big rally (1,821 on October 15 to 2,079 on December 5), it fell to 1,973 on December 16, scrubbing off about two-fifths of that rally. Then it popped back to a new all-time high at 2,093 on December 29, reassuring many that the rally was going to continue.
Since then, it’s pretty easy to describe what the S&P 500 Index has been doing. It can be described like this: Down, Up, Down, Up, Down, Up.
It’s kind of a cute chart. It looks like what a child might deliver if you asked her to draw a market that can’t make up its mind. But if someone asked you to make a decision about investing in the market, it wouldn’t be much help at all.
The tendency to say, “If this goes on, we will be right here next Thanksgiving,” is almost irresistible. The forces certainly look evenly balanced.
When I look at a chart like this, I try to remember that it is basically a picture of the sum total of how the U.S. large-cap equity community has been feeling for that past few months. And it turns out that any time the S&P gets above around 2,060, they’ve gotten increasingly anxious, the pessimists have taken charge and the urge to hit the sell button has grown irresistible.
But when the S&P has dipped below 2,000, the optimists in the community have seen more and more attractive bargains and they have succumbed to the impulse to hit the buy button.
Who will win?
History tells us that the general tendency of the U.S. stock market has always been up in the long run. In fact, that historical truth is the major strategic insight behind one of the most popular retirement investment strategies there is: Buy & Hold.
Because the market always goes up in the long run, the theory goes, you should just put your money in the market and let it grow. And if you’re not buying the whole market, you should just buy Blue Chips, large caps, dividend payers and the like and let time do the work.
If you have enough time, it’s not a bad strategy. Shovel money in all your life and spoon it out when you retire.
And hope that you don’t wind up in the situation of the couple in the New Yorker cartoon. The man is sitting on the sofa with his laptop and says: “If we take a late retirement and an early death, we’ll just squeak by.” I’d like to suggest that you don’t have to either rely on time or just squeak by. Cabot’s investment advisories can get you actively engaged in your investment strategy. We can tell you what the markets are doing, including when they come out of this prolonged dither they’re in right now.
Our growth advisories can make sure you never miss a major market uptrend and never stay heavily invested when market melts down. We can identify the best value stocks, options, small-caps, income stocks and emerging markets issues and show you how to invest in them.
And each of Cabot’s advisories give you direct email access to the experts behind them. It’s not a deal you will find anywhere else.
So stop worrying about how long this flat, jumpy market will continue. Cabot’s advisories will find you the investments that are working right now. Take control!
In this week’s Stock Market Video, I look at the indecisive, up-and-down market that can’t seem to make up its mind. The major indexes are all in parallel paralysis, without a useful clue as to what the next major move will be. I see this as a good time to be looking less at the market and more at individual stocks. I give several examples of stocks that are performing well, and a few that have stumbled. Click below to watch the video.
Tim’s Comment: Bernard Baruch had great success first as an investor and then as a government advisor in both World War I and World War II, and after reading his accomplishments, I believe that some of his success came from observing what was most likely to occur in the future, rather than, as so many of us are wont to do, what we hoped would occur.
Paul’s Comment: I would only add a couple of qualifications to Baruch’s definition. I’d say that, “a successful speculator is a man who observes the future … and guesses right.” It looks so easy when you read a biography of a man who guessed right all his life. But as the legion of unsuccessful speculators would gladly tell you, the guesses aren’t always right. But who writes books about how to get rich? The successful ones.
In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
In this issue, Tim Lutts, Chief Analyst of Cabot Stock of the Month, continues his list of Revolutionary Stocks by looking at the disruptive potential of 3D printing, which is on the verge of overtaking many older technologies. Stock discussed: Stratasys (SSYS).
Cabot Dividend Investor’s Chief Analyst, Chloe Lutts Jensen, writes about how to use earnings growth, debt levels and risk factors to find utility stocks with the highest yield and the best safety rating. She starts a new series of High Dividend Utility Stocks with her first pick. Stock discussed: Consolidated Edison (ED).
Jacob Mintz, the expert behind Cabot Options Trader, looks at how skew, order flow and open interest can give you insight into how options traders look at a stock. Stock discussed: Facebook (FB).
Have a great weekend,
Chief Analyst, Cabot China & Emerging Markets Report
And Editor of Cabot Wealth Advisory