US Stocks Make 31 Record Highs in 2014, But Investors Panic During 3% Selloff
US stocks as defined by the S&P 500 made 31 record highs in 2014, most recently on July24th. Through Friday afternoon, stocks declined 3.3%, which is to say less than the decline of 4.2% we saw in April of this year, and decline of 5.6% in January. We know that FOX and CNBC declared an apocalypse because of an increase in phone calls and e-mails from our clients. One of our long term clients wrote to say that he was upset we had not protected him from a $44K paper loss. In conversation, we learned that he was not talking about YTD (actually he's up $117K for year on a portfolio worth about $2 million) but from the high of a week ago. We gently reminded him that the only guarantee we offer is that "portfolios will fluctuate over time." We also gently pointed out that he and wife continued to get their monthly draw regardless of how crazy markets get, an unbroken streak since he retired 14 years ago (right at the start of the "decade of suck!")
The CNN Money Fear and Greed Index swung to "Extreme Fear" from last month's "Extreme Greed." No doubt the investors who finally started buying stocks this earlier year aggressively sold on Friday. This is why we have a thriving business - 98% of average investors "Buy High/Sell Low." To actually "Buy Low/Sell High" obliges us to ignore "crowd think" and rely on the analytical processes that have aided successful investors for decades. There's nothing brilliant about what we're doing other than executing a good plan with diligence and discipline.