Friday, January 5, 2018

Bull Markets Come to an End--But WHEN??

Bull Markets Come to an End

Click on Chart to see it larger

The above chart illustrates some similarities between the 1920-1930 and 2008-2018 periods. Markets saw an approximate 40% correction in 1920-1921 (adjustments to aftermath of WW1) followed by an almost 8 year rise (driven by new technologies of electricity, radio, and autos) with a brief period of exuberance—then followed by a drop of more than 60%. Nobody is predicting anything close to the 1929 scenario, but the 300%+ 8 year rise from 2009-2017 (driven by new technologies in oil/gas, internet and medical) has some similarities to the 300%+ 8 year rise in 1921-1929. Often, such periods are followed by a period of euphoria with rising prices----and then a nasty correction.  The only conclusion to be drawn, is January 2018 appears to be a time with relative high prices and a great deal of investor euphoria---investor caution seems prudent and appropriate.  

At some point in time, even the market's greatest cheerleaders admit that sooner or later some sort of “correction” is coming. When and how big is completely unknown. Be prepared by managing risk—but not necessarily completely avoiding the risk. 

Keep in mind that most of the "experts" did not see the 1929 crash coming. In the first half of 1929, markets rose 25%+.