You Know Market Euphoria, and This Isn't It By Brett Eversole
English artist Damien Hirst made headlines in July 2021... Anyone who bought from his newest collection – "The Currency" – would receive a non-fungible token ("NFT") instead of the original piece of art. Then, they had a year to decide which format they wanted to keep. If they chose the NFT, Hirst promised to destroy the original piece. In the end, 4,851 buyers decided to keep the NFTs. And Hirst began a mass burning of his original art. This whole story... creating art, turning it into an NFT, and then burning the original... is about as "peak bull market" a story as you could get. It's emblematic of where we were in 2021. Today, it's much different. Instead of throwing caution to the wind and buying, folks are looking for any excuse to sell. And while you might feel tempted to join them, know this... Buying in environments like today's is how you set yourself up for massive long-term gains.
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We're far enough past the mania of 2021 to begin putting it into historical context. And it's clear that it'll go down as one of the craziest moments of investor euphoria of our lifetimes. Meme stocks soared on hype from Internet message boards. Cryptocurrencies were minting millionaires. Everything was going up. Anybody with a pulse could make money investing in that kind of environment. And the more risks you took – even if those risks were downright stupid – the more money you made. Like it or not, that's what the wild, final stage of a bull market feels like. And while we're back in a bull market today, it certainly doesn't feel like it. Instead of falling over themselves to invest, everyone is looking for reasons not to act. For some, it's the fear of a recession... one that still hasn't shown up. For others, it's that the biggest stocks have been driving most of the overall gains this year. Heck, even the looming 2024 election has many investors in "wait and see" mode. Numbers can tell you plenty about how folks feel. But it's just as true that investor sentiment is something you can feel in the air. You know what a boom felt like in 2021... And today isn't like that. Not at all. Of course, I like to analyze the numbers too. One simple way to see today's negativity is CNN's Fear & Greed Index. This uses seven indicators to gauge investor sentiment. And while folks were getting greedy earlier this year, that trend has reversed in recent months... This indicator showed greed when folks were getting excited about stocks this summer. But the market has faltered since. And as a result, the index recently hit fear levels similar to last year's market bottom. This data matches up with the feeling in the air. Few investors are bullish right now... And many of those bulls are jumpy, looking for any excuse to change their minds. It's hard to go against the crowd in this kind of environment. The idea feels uncomfortable. But times like these are opportunities to set yourself up for long-term gains – before excitement returns to the markets. I urge you to take advantage of it. Good investing, Brett Eversole Further Reading Buying stocks that can reward you for years, when nobody wants them, is a fantastic wealth-building strategy. That's why panics are great opportunities to look for discounts on the market's most reliable companies. This "flash crash" story is a classic example... Read more here. "Clearly, folks are worried about the market right now," Matt McCall writes. "But historical trends indicate that now is not the time to panic." We've seen similar spikes in fear, based on one ratio – and, despite what you might expect, selling on those signals would have been a mistake... Learn more here. |
Market Notes HIGHS AND LOWS NEW HIGHS OF NOTE LAST WEEK CBOE Global Markets (CBOE)... trading-exchange operator
Reinsurance Group of America (RGA)... reinsurance
Unum (UNM)... insurance
RenaissanceRe (RNR)... insurance
Fair Isaac (FICO)... credit-score data analytics
H&R Block (HRB)... tax-prep company
Remitly Global (RELY)... online money transfers
Costco Wholesale (COST)... membership-only stores
Lululemon Athletica (LULU)... yoga pants
American Eagle Outfitters (AEO)... apparel
Abercrombie & Fitch (ANF)... apparel
Construction Partners (ROAD)... roads
Murphy USA (MUSA)... gas stations
Frontline (FRO)... oil tankers
Shell (SHEL)... oil and gas
Hess (HES)... oil and gas
Enterprise Products Partners (EPD)... oil and gas
Williams (WMB)... natural gas
Range Resources (RRC)... fossil fuels NEW LOWS OF NOTE LAST WEEK Morgan Stanley (MS)... financial services
T. Rowe Price (TROW)... asset management
PayPal (PYPL)... mobile payments
Texas Instruments (TXN)... semiconductors
Corning (GLW)... smartphone glass
Pfizer (PFE)... pharmaceuticals
Moderna (MRNA)... pharmaceuticals
Thermo Fisher Scientific (TMO)... life sciences
Ulta Beauty (ULTA)... makeup and skin care
Hormel Foods (HRL)... food products
Southwest Airlines (LUV)... airline
United Airlines (UAL)... airline
General Motors (GM)... automaker
Crown Castle (CCI)... communications REIT
Rayonier (RYN)... timberland
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