Run with Bulls, Not with Scissors

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Parents generally teach their children to be careful and offer good advice - look both ways before crossing the street, don’t run with scissors, always wear a seatbelt. So investor caution is natural. Nine years into a bull market, the retail investors who have been reluctant to get into stocks have finally starting dipping their toe into the equity pool. Yesterday, the market had a rare down day and today the media headlines are questioning if this is the end of the bull market. Yikes. They point to rising yields – which may make bonds more attractive when compared to equities. This interest rate talk may be spooking investors, but a 10-year yield of 2.7% is hardly competition for stocks and rising yields are indicative of a rising economy – an economy that will likely surprise on the upside now that tax cuts have unleashed growth. After four weeks of basically straight up, it is normal to see markets go down. For the first time in a decade both the economy and market are surging. It turns out that the “new normal” sub two percent economy was a fallacy, just like waiting an hour after eating to go swimming. If you have a well-diversified portfolio, don’t overreact. Let the fundamentals (corporate earnings) do the worrying for you. Those earnings don’t look too concerned. The bull is still running. Fourth quarter earnings season is 30% complete and growth so far is better than expected, more than 12%. Review yesterday’s Global Perspectives™ Investment Weekly for a little perspective on how much the market has run so far this year.

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