The Dow Jones Industrial Average has had the best first half-year since 1999. Had I told you at the beginning of the year this would happen, would you have believed me?
Right now there is quite a bit of concern in the markets. This is nothing new. In fact, there are always worries in the market. There never has been, and there never will be, a time when there isn’t substantial concern about the state of the financial markets. This isn’t just a euphemism. This is a mathematical fact. By definition any financial market must be at a level where half of all the trading is expressing concern or worry. Remember, you don’t buy and sell from a Nebula. Sellers are selling because they think the market will go down, and the market price is defined by the level where buyers and sellers are perfectly matched in numbers.
Perspective on this year. Would you have believe me?
Remember what was going on at the end of December, 2012? The fiscal cliff was looming. The sequester was looming a few months out. What if I had told you the next six months would look like this:
1. The US stock market would have a great first half of the year. The S&P 500 will be up 15.75%
2. The US dollar will be strengthening and inflation concerns will be easing, causing a huge pullback in gold.
3. The US will be doing very well relative to emerging markets. China will be the one everyone is worried about.
4. Bond yields will be creeping up. The end to painfully low bond yields appears to be in sight.
Does it sound too good to be true? Had I suggested this at the end of 2012, most investors would have thought this overly optimistic, and yet here we are. If anything it just puts the current worries in perspective. All I have heard over the last 10 years is how China is going to take over. Now that China’s economy has hit a snag, everyone is worried about it. Be careful what you wish for.