When will this end?

I hear so many friends and acquaintances asking the question, “When will this end?”  Or, “how will it end?”

Well, as is my custom, I must state that I am not clairvoyant. I don’t know when “it” – i.e., this bull market in stocks – will end. But, I assure you all that there is a correction coming and, also, a bear market. But just when? I don’t know.

However, it’s not enough to say that, “Since this thing has started in 2009, it’s long past due for a big correction.”

Markets don’t work like that. You probably know that.  Or, if bull markets finally come to work that way, then we’re going to see the strangest correction of all time, given the inflation we don’t have, the low interest rates we have, the employment and wages we do, the earnings growth here in America and around the world.

This just is not the way bull markets end.

Moreover, there is not only no euphoria, which usually accompanies market tops; but globally, investors remain skeptical and very wary. Clearly, ghosts of 2000 and 2008 continue to haunt investors’ sentiment, which, need I remind you, is also very bullish.

Many others factors continue to support this view. This bull market will die, likely, when the Fed sees fit to tighten meaningfully – which they are not doing now – by draining liquidity from the system (raising rates a lot); or maybe by raising the discount rate many times in succession; or maybe by inverting the yield curve. But these and other steps will, however, only be taken when the economy overheats (which it hasn’t); when inflation surges (which it hasn’t); and speculation is rampant (which it isn’t).

In America, companies are doing so many things better, faster, cheaper, and for the customer. The biggest threat they face now, I think, is political. Don’t kid yourself: politicians are capable of inflicting great damage on both businesses and investors. Importantly, and differently, unlike the business trusts that were the rage in the late 19th and early 20th centuries, and were busted up by the government, today’s businesses are much more popular with their stakeholders. (Think Apple.) That fact also leads me to believe that this bull market ain’t over yet.

Back in the year 2000, when the dot.com bubble was about to burst, it may have been very smart keeping a lot of cash available.  But in 1455, with the invention of movable type (which enabled Gutenberg to print his Bible) and launch the explosion of mankind’s ability to communicate, was that a bubble? Or, how about 1820, with the coming of the steam engine, was that a bubble in manufacturing and transportation?

I don’t believe they were bubbles, and I don’t believe that we are in the midst of a stock bubble today either. We live, for better and for worse, in a time of significant leaping forward in technology and productivity – also of partisanship in politics, arrested development on the part of many younger folks addicted to their social networks and devices, and poorly educated and ill-prepared young people to enter life and the work world.  But this is still a great time in world history for technology and productivity.

So, I share with you my own conviction that our joyless, much-hated, and much-doubted bull market will keep bumping along. Those of you inclined to believe in gloom and doom, and those of you hearing others worried that another bear market is peeking around the corner: because, well, on the surface of things, the world is a mess and may not change much; or that it has been nine years since the last bear market, or that now is the time to get out of stocks, or at least lighten up, to all of them, I say, “Watch out!”

While it might feel good-in-the-moment to take money off the table and assume a regression-to-the-mean is soon going to be upon us based upon recent history, seeking comfort has never been the basis of a winning strategy in the stock market. Neither has being, or becoming, a market timer. Meanwhile stocks, in general, with their predictable backing and filling, and occasional and unpredictable downdrafts, continue to rise.

The stock market tends to be a predictor, of course, not of the past, nor even a confirmer of the present, but a predictor of future economic change, discounted back to the present.

So, my take, as of now, for what it’s worth, is that there are great things taking place that are not readily apparent. Behind the outrageous political noise of our day, American businesses are participating in one of the greatest growth and productivity surges the world has ever seen.

Interestingly, too, this technological leap forward is taking place at the same time that increasing transparency (made possible by technology, too) is making it more fashionable to do the right thing. Even a small shift toward more ethical behavior opens up an even bigger opportunity for American businesses operating throughout the world. In short, I see plenty of reasons why the current bull market could be extended. All this does not imply that my current worldview is without risk nor that bear markets and recessions have been repealed: they have not. There are real threats, for sure. (Like No. Korea.) But in my opinion, it is not the time to run for cover, at least not yet. Let us react to the things we can control, not the things or the feelings we can’t.

If this sounds like I am trafficking in a bit of faith and hope, you got it. I traffic in a lot of that stuff. Someday, I hope everyone reading my stuff might as well.

God bless you all.


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