(Part 1 of a 3-part series)
The bull market of 2009-2014 has to be one of the most disavowed, unloved bull markets of all time. Each and every time it sees even routine weakness, bears come out of the woodwork with calls of 1929, 1987 and 2007 all over again. And then stocks stop declining and continue on their merry way higher. This is exactly how long-term bull markets survive, thrive and work higher.
I can't tell you how many very smart (and some not so smart) industry colleagues have been either calling for the end of the bull market or for a 20% decline for years. I read their weekly newsletters and just scratch my head, not because they are wrong. I am wrong more times than I want to remember.
It's okay to be wrong in this business, but you cannot stay wrong for months and months, quarters and quarters. You can't break out prominent interviews and articles from others who are also wrong and use them to substantiate your wrong position. Too many people sit and wait with losing positions and reason it away as being early. In this business, early equals wrong.
It isn't until the masses buy every dip that the bull market begins the topping process. Remember, I said “begins” not “bull market immediately ends.” If you remember late 2007 and early 2008, stocks pulled back during the fourth quarter and the masses bought. And when the market had a 20% decline in January 2008, only short-term sentiment became sufficiently negative to support a rally. Intermediate and long-term sentiment remained positive until the Lehman Brothers fiasco, which is why it was difficult to hammer out any type of significant bottom.
Paul Schatz is president of Heritage Capital