Déjà vu all over gain

Last week investors cheered as the Dow conquered 10,000 yet again.  The first time it reached 10,000 was  March 16th, 1999.  Since then, the stock market has zigzagged above and below 10,000 more than 25 times.  You could call it a “tread mill economy” where there is plenty of action that is going nowhere fast.  As disturbing as that may appear, history tells us that this not uncommon.  Looking back, the stock market highs of 1929 were not repeated until 1954, approximately 25 years later.  In 1964, the Dow reached 1000 and it took nearly 18 years for a new bull market to begin when the Dow finally started to gain some momentum in 1982.  The good news is that all of these bear market periods were followed by equally long bull markets.  In fact, the bull market that began in 1982 lasted nearly 18 years and averaged nearly 19% annual returns. The bad news…we are 11 years into this bear market and the last three secular bear markets have lasted about an average of 17 years. That may mean that 2016 could be the year when the next secular bull market for equities begins.  Does that mean we can’t make an adequate return until then?  The answer is no. An investor can make an adequate return in a secular bear market but must be willing to miss some short term opportunities to protect capital and avoid a catastrophic loss. It means swinging for a lot of singles and doubles instead of swinging for the home run.  It means concentrating on dividends and fixed income securities.  It means being proactive and at times raising cash and just sitting on it until a high degree of conviction arises.  Most of all, it requires patience.  Unsurprisingly, some of the world’s most successful investors such as Warren Buffett and legendary hedge fund manager Seth Klarman have the patience of a saint.  Undoubtedly, exercising patience in a real time, fast paced world is challenging.  As for the markets, currently the S&P 500 index  has broken out above it's 200 moving average and is a couple of percentage points away from signaling that investors still have an appetite for risk.  This could have the potential of setting up a summer rally in the short term.   However, just like the summers here in Florida make sure you are protecting yourself at all costs because that summer heat can end up really burning. 

“He that can have patience can have what he will.”  Benjamin Franklin

Best,

Gregory Pacitti CFP®

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Gregory Pacitti.  Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Tax or legal matters should be discussed with the appropriate professional. Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. The above material has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete. There is no assurance that any trends mentioned will continue in the future.