5/8/2013 1:14:00 PM The stock market doesn't always go up
By Brad Blackburn
If I had to pick just one eternal truth to deliver to you, my loyal readers, it would be this: The Seahawks are winning the Super Bowl this year baby! If you were nice enough to allow me two truths, I would add this: The stock market doesn't always go up. However, recent events have me questioning this truth (no, not really). For six consecutive months, the S&P 500 has risen. Over the last five months, the biggest pullback we've seen was a mere 3% -- and even that relatively small drop took a number of days. You'd think that after months of charging ahead, the markets would be eagerly searching for any excuse for a little good-natured panicking. However, the last few months have provided many opportunities for that -- and the markets never took the bait.
Remember the dreaded Fiscal Cliff? In the weeks leading up to it, the biggest drop in the S&P 500 was slightly more than 3%. That loss was recovered in only two days. Remember the Sequester? The S&P 500 lost 2.8%, which it fully recovered it within a week. Remember Cyprus? That little thing would have caused a global panic two years ago. This time, the markets barely reacted. Even faced with an array of weak economic news in recent weeks, the markets still recovered.
Why are the markets suddenly behaving like an unstoppable train? Here's my theory: After years of going through crisis after crisis, investors are becoming more convinced that the doomsday scenario isn't happening. Therefore, people and institutions are becoming more willing to invest. However, thanks to the Fed and their record low interest rates, savings accounts and CD's are losing money after inflation, and bonds are scary. It's almost like the stock market is the only real option. Fittingly, the best performing parts of the stock market this year have been the areas that are regarded as the "safest." That would be dividend paying stocks, utilities, health care and consumer staples. The strength of those relatively safe parts of the market indicate that while there is a lot of money waiting to be put into stocks, investors are trying to do it as conservatively as possible. I hope there is a lot more money waiting to be invested, because this has been fun.
So what should you make of all this?
Although I want you to fully enjoy this wonderful run in the markets, I feel compelled to rain on your parade a little bit. It's not always going to be this easy. Don't forget the stiff headwinds we are facing. However, the economy is still chugging along and may be gaining momentum. Let's hope that continues.
Brad Blackburn, CFP®, is the owner of Blackburn Financial, Registered Investment Advisor. Blackburn Financial is located at 121 Cottage Ave, Cashmere. He can be reached at 509-782-2600 or email him at firstname.lastname@example.org