Come back with me to Davos, 2018, for a minute.
If you’re not familiar with “Davos,” it’s an annual gathering of the world’s high-powered, beautiful, and richest at an expensive retreat in the Swiss Alps. It’s an great opportunity to rub shoulders with movers and shakers who gather in a gorgeous winter wonderland to survey the world they seem to own. Membership at Davos confab is not to be applied for. One has to be invited. Then, depending on your level of participation, you’ll pay anywhere between $60,000 and $600,000 for the privilege of being there.
I haven’t been invited, and that’s OK with me.
This year’s meeting wound up on January 26th, 2018. Hoold onto that date for a few paragraphs. What was surprising about this year’s meeting was, for a change, how good the world economy looked to the Davos folks. Oh yes, Trump was in office, that was troubling. Trade matters were of concern, too (and still are, because of Trump), climate change also was a focus, since Trump, head of the world’s largest economy, was ignoring it. And Trump was also ignoring the Iran nuclear deal, which generally troubled the Davos people
But over all, the world looked good. Better than it had in years.
In fact, the International Monetary Fund raised its global growth forecasts for 2018 and 2019 to 3.9%, expecting the global economy to continue to recover on the back of buoyant trade and investment, as well as then-recent US tax reforms.
Christine Lagarde, the IMF’s Managing Director, presented a bright outlook during one of the week’s early sessions. About half of the global revision was attributed to the impact of the US tax package (Oh, that Trump guy) , which is expected to boost growth in the United States through 2020, and have a positive knock-on effect on its trading partners.
It all looked so good on that last day of meetings at Davos, Switzerland, Friday, January 26th, 2018.
Back in New York, the stock market closed at a new high – again! There had been 17 days of stock trading up to that point in 2018, and the market closed at a new high on 14 of those 17 days.
As the folks in Davos got on their planes, what could possibly go wrong? Economies all over the world were humming. Markets were up, up, and away.
Yet, when the markets opened on Monday, January 29th, they fell. And they fell pretty hard and quickly for the next two weeks. Since then there have been efforts to recover; several of them, in fact. But markets are still down about 10% from their 2018 highs.
Okay, folks, I have have given you a long introduction to a point I want to make, and I don’t want you to miss. Back in January, things were so good, and so many people were so convinced that they could only stay the same or get better that everyone who wanted to invest probably had already invested. So, with little money able to move into the market and lots already in it, moving money out became more likely. And money powerfully moved out of stocks.
Lately, however – and this is part of the same point I want you to pay attention to – the “experts” in the media are again all preaching from the same gospel. Which is? That the markets are ready to roar up again?
The group-think message now is that markets probably topped in January. That tech and finance – the prior leaders – are dead, especially given Facebook’s grilling in Congress and likely regulation coming. That inflation is beginning to come back and interest rates along with gas prices are set to slingshot up.
In other words, we’re all toast and the economy is, too.
If things looked too obliviously good in late January, today, they look too uniformly awful. That does not mean we will rocket back to new highs soon. But right now, I’d be more concerned about the uniformity of negative voices shouting “Run for the hills” than I would be concerned about markets falling much further. There’s so much pessimism out there right now that it almost makes my mouth water for the opportunities that may unfold.