I don’t normally write about the Dow, mainly because it consists of only 30 stocks… and only 30 large and mega-sized stocks to boot. So, it doesn’t really give us a good feel for what “the market” is doing if we completely ignore mid and small-sized companies. However, I felt it made sense to give the Dow some love today, especially since so many people pay such close attention to its value each and every day.
Below is roughly an 18-month chart of the Dow, and as you can plainly see, it’s gone nowhere. You could also say it’s been pretty frustrating this past couple years. With trade war fears, North Korea, Iran, and now an upcoming US Presidential Election in only 16 months, trust me… the fears and reasons for worry will never subside. But here’s what I see…
Super Mario is at it again and the Dow is trying to break above 28,000 in a convincing way. While there are always going to be news, radio, and other “noise” that will distract you, the undeniable, irrefutable law of Supply & Demand is what you need to be focused on. NOT China, Mexico, the G-20, or bad school loans!
Here’s a little secret. Everyone understands the news, but very few people (except those who are properly trained, educated, and have dedicated their careers to it) understand the technical landscape of the markets enough to see the forest for the trees – to not get distracted by the “noise.”
Warren Buffett was out on a weekend golf outing when one of his friends tried to make a bet with Buffett. The bet cost $10 and if he made a hole-in-one, he’d win $20,000. Warren turned down the bet. Why?
Buffett, now 88 years of age, worth $82.5 billion and 3rd on the Forbes list of billionaires, was made fun of for not taking it. After all, what’s the big deal for a billionaire to spend $10 on a bet?! But here was Buffett’s response when asked why he didn’t take it:
“If you let yourself be undisciplined on the small things, you’d probably be undisciplined on the large things, too.”
The point is, you don’t take bets on low-probability wins, even if the cost is minimal. But when the probabilities are in your favor, bet away!
Bringing this all home, that’s where I feel we are with the market today. International markets (such as Australia, Brazil, Switzerland, and even Greece) are trading around new highs, which isn’t evidence of an oncoming recession! In addition, U.S. markets are still hovering above the January 2018 highs, which is my big, fat green light in terms of investment risk (see what I did there?). Even if we fell below those levels, I feel there is still a little “cushion” before I’d start feeling concerned about a potential crash at this juncture.
I’ll leave you with one of my many, favorite quotes. When asked what he thought the market was going to do in the future, J.P. Morgan responded:
“It’s going to fluctuate.”
Have a fun, relaxing weekend and we hope to hear from you soon!
Till next time…
AdamCategories: Adam Koos, CFP®, CMT®, Market Commentary