“Bull Markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”- Sir John Templeton
Sound familiar? If you think about the turbulent market cycles we have been through the last decade or so I think you will agree that the above quote by legendary investor Sir John Templeton rings very true today. Where are we now in our current market cycle?
Despite the incredible bull market rally in the markets over the past year or so, it seems that we are still stuck somewhere between pessimism and skepticism. Many investors are still wary of this rally
and are concerned about the economy back sliding into a double dip recession. Indeed, there continues to be large amounts of pessimism and skepticism out there today.
Certainly, we can agree that there is not a lot of optimism resonating within the general investing public and we are nowhere near euphoria. Understanding this cycle of emotions is key to being a successful investor. Sir John Templeton understood this. He saw his share of bull and bear market cycles during his 95 years. Having passed away in July of 2008 he did not witness the financial crisis
and stock market collapse that began shortly after his death.
Nonetheless, I am sure he would have recognized the pessimism that marked the bottom of the market and would also realize today that the current bull market has the potential to continue.
No doubt, there will be some down periods during this upward cycle. It would not surprise me at all to see a correction soon. All bull markets have them. The market never moves up in a straight line. In
fact, since 1926, the market, as measured by the S&P 500 Index, has produced positive returns approximately 70% of the time and negative returns about 30% of the time. This means that you should
expect, and not be surprised by, a down year every three to four years. Emotions drive markets. Regrettably, fear and greed cause many investors to buy high and sell low.
Think about Templeton’s words of wisdom. Avoid repeated poor decision making by learning to recognize and understand how your own emotions can lead to detrimental behavior. We all have emotions. That makes us human. How we handle these emotions often makes a tremendous difference in our financial wellbeing.
Damien helps individuals invest and manage risk. He is a CERTIFIED FINANCIAL PLANNER™ professional and an Investment Adviser Representative of, and offers securities through, Financial Network
Investment Corporation, Member SIPC. These are the views of Damien Couture, CFP® and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Additional risks are associated with international investing, such as currency fluctuations, political and economic stability and differences in accounting standards. Not all recommendations are suitable for all investors. Each investor must consider their own goals, time horizon and risk tolerance. You can contact Damien at 925-280-1800 x101 or damien@walnutcreekwealth.com.