For the passengers aboard the Titanic, warnings didn’t do them any good. Captain Smith was unconcerned about icebergs – even though he received multiple radio signals saying they were headed right for some. That decision turned out to be disastrous for everyone on board.
Today, investors are having their own mini-Titanic moment.
After a multi-year bull run, 250%+ gains and expensive stock prices, investors are turning a blind eye to fundamentals, portfolio allocation and common investing sense. It’s not to say that bull market will end tomorrow, but we’ve become drunk on the Kool-Aid and we’re ignoring normal market facts.
For investors, the brick wall – aka the iceberg – is coming, and yet, we aren’t moving out of the way.
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Couldn’t Care Less
It’s easy to be happy and ignore investing rules when stocks are going through the roof. And that’s basically what’s going on these days. The S&P 500 tracking SPDR S&P 500 ETF (SPY) has gone gangbusters over the last few years, swelling by more than 250% since bottoming out during the Great Recession. And in those huge gains, investors are potentially ignoring a looming problem – namely, a wide market correction and future recession.