Saturday, August 28, 2021

Will There Ever Be a Top to the Market?

The S&P 500 is up 20% this year, without a single 5 percent pullback or correction. Last week, we saw between 2 to 3 percent pullback and I advised staying the course. This week, markets were up about 3 percent.

While there is no way to predict the future, at some point the market will correct. There's not a lot that the market seems troubled by: Afghanistan, Covid, or Inflation seems of little concern to investors right now. Actually, the economy is doing pretty well, all things considered, and business profits are looking OK. And ultimately, profits drive the market. 

The Fed is not going to do anything until later this year. So interest rates will continue to be low. But look for a change near the end of the year, first of next year. That may change market dynamics if the Fed allows interest rates to rise. 

Have a plan to exit the market if you're still fully invested. And not just equities. Watch bond prices. As the Fed tapers is bond purchases, the upward pressure on bond prices will abate. And follow that plan. Don't watch as things unravel. If you sell, you can always buy back in, most likely at lower prices. 

Here's a 12-month chart of the S&P 500. Just amazing. 

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