The Train is on the Move
May 11, 2018
The reasons for investors to get excited about this market are growing. Leadership has broadened out beyond technology stocks. Equities are now working on a seven-day winning streak. The major indices have regained their losses and are currently positive on the year. Investors are reallocating their assets, and safe-haven stocks such as utilities and department stores are being sold as investors take on more risk.
And finally, a sense of urgency is working its way into the market as fund managers scatter to do what I’ve been preaching this whole time: put more money to work.
On Wednesday, the Dow Jones Industrial Average broke resistance at 24,500, closing above its 50-day moving average as well as the descending trend line it was forming amid its consolidation. While volume has been on the light side it’s also been decidedly positive.
The fear pendulum is swinging from worries that the market was going to derail to a sense that maybe the train is leaving the station, and now it’s picking up some speed.
My main concern now is the amount of individual investor apathy that persists. In the first week of the year, individual investor bullishness was at 60% and it has been in a steady decline since. However, investors aren’t becoming bearish – instead, there’s a great sense of indifference.
What’s worrisome is that so many of these same folks are excited about the country. They see signs of the economy coming back but have been too intimidated – or too burned in the past – to care about riding some of that wave of revival. Instead, they’re simply cheering it from the sidelines, and I commend you for not sitting there along with them.
Here are the three key takeaways right now:
- The economy is taking off.
- The stock market is taking off.
- There is a lot of room on this runway.
It’s not too late to jump on the train and continue taking off with it. Remember to invest for the long term, taking into account the fundamentals that truly drive stocks over time. When you are most intimidated, that’s typically a good time to add to positions or initiate new ones.