I think the heart of the market is still quite resilient given the volatility that it has been experiencing for years.. An ode to the days when it was raking in profits.
In 7% of the trading days since 1960, the S&P500 has refreshed its record. In the period following the 2008 crisis, this rate has doubled.
The S&P500 doubled its average performance in the days following its record-breaking days.
In other words, the stock market loves momentum.
When the market is going up, people believe it will continue to rise. As long as people remain positive, the market continues to rise.
That is until the relative number of pessimists starts to increase. Then people believe that a falling market will slide even more.
These fluctuations will ebb and flow. Nothing rises forever and the value of very few things goes down to zero.
Quoting Ben Graham, in the short term, the market is like a voting machine. It soars when the majority are positive and falls when they are pessimistic. In the long run, however, the market is a weighing machine. Those who own the truly valuable assets are rewarded.
So what’s your investment horizon?
Short-term fluctuations are challenging to predict. Instead, it is best to purchase valuable assets when they are sold at prices that are lower than their intrinsic values. Therefore, we must make sure that our emotions do not taint our investment decisions.
