Saturday, July 9, 2016

Follow The Message of The Market, Not Opinions

News
Investors that follow opinion rather than the message of the market generally end up chasing their tails in terms of investment performance (returns). Opinions are so common most investors simply see them as facts. The statement that investors typically don't buy bonds and stocks at the same time, for example, is opinion formed by shallow observations (history lessons). History shows us that typical can easily become atypical for extended periods. The statement that bonds are consider a safe haven, while stocks are not is also an opinion. History shows us that stocks can move against conventional wisdom when confidence in the public sector is collapsing. A stock market rally against a business cycle contraction, for instance, would defy conventional wisdom. Investors that follow opinion rather than the message of the market would have missed bonds and stocks rallying together for several weeks/months.

Headline: S&P 500 near record highs? Treasury yields at lows? Something’s gotta give

It’s a tug of war between stocks and bonds, at least, it feels that way. The S&P 500 on Friday touched its record closing high of 2,130.82 as Treasury yields tumbled to record lows.

The sharp swing higher for stocks was sparked by a June jobs report that showed that the U.S. created 287,000 new jobs in June, quelling some of the nagging fears that the labor market was beginning to sputter after the May report showed a measly 38,000 jobs were added.


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