It Ain’t Necessarily So

“The man who is a bear on the future of the United States will always go broke.”
– J.P. Morgan

The Stock Trader’s Almanac has studied the “first five days” of the year phenomenon going back to 1950. 

It says that when stocks finish that period higher, they noted: “The S&P 500 has been positive 82% of the time at year-end with an average gain of 13.6%," according to their calculations.  

In the first 5 days of this year we were positive – not hugely positive at roughly +.70% in the S&P 500 - but in the black nonetheless.

So, as investor what can we do with that information?

Eh, absolutely nothing. 

It serves little value other than some faint, vague "feeling" conjured up in the back of our minds whispering to us that "this means all is well...."  

Don't fall for that, please.  

And while I’m not suggesting anything terrible or negative, what I am saying is that there’s all kinds of news and statistics out there that appears to guarantee a future based on a past result.

And that just ain’t necessarily so.

A Quick Summary

Now, besides sketching out a small gain in markets, the first 5 days of 2020 were also rather busy. 

Let’s see:

• The China Trade War, oh wait, that's done.  
• The impeachment process - Hmm, that's still vague and heated.  
• And the new monster in town – Iran - According to some in the media, we’re already at war! 

But all this really tells is that the Holidays are over, the gloves are back off, and the media war for your attention is back in full swing.

And that means we need to continue to work very hard to ignore most of it.

Scared to Death

One thing that is working for us is sentiment. 

Even as we sit at all-time highs, with records being set in many different categories, the investor audience remains tense.  

Long-term investors with proper focus on their plan ahead, dosed with a truckload of patience, will find this is an excellent piece of news.  

Here’s the most recent AAII sentiment data:

Now think about this data for a moment.  

After a 21-month trade range, ending in late October 2019 with the breakout to new highs, we look at this data and would readily expect the market may instead be in a bear market.  

Note the imbalance - All-time highs while 66.9% of the crowd is not bullish.

Many years from now, long-term investors focused on their goals and their path stand very high odds of being pleased with the idea that most of the crowd remains - shall we say - skittish at best, as the various oft-quoted Index numbers get larger and larger.