From the “nothing new under the sun” department, the little guy is on the wrong side of the market. As the stock market surges higher, individual investors are rushing into bear market funds.
Look, the stock market is not rational. It never has been and it never will be. So we can intellectualize why the market should or should not be doing all we want to. But Mr. Market is going to do whatever it has to do to confound the largest number of investors.
So it doesn’t work to look at the market and say the fundamentals are bearish, so the market has to go down soon. Or it’s had too much of a run from the lows, so it must be nearing a top.
I love this Richard Dennis quote from over 20 years ago…
…you have to be a pure empiricist and realize that what you see – the price action of the market itself – is all you get. Abstractions like crop size, unemployment and inflation are mere metaphysics to the trader. They don’t help you predict prices, and they may not even explain past market action.
All we know is price action. What is the market doing? What is the trend? What direction does it appear to be heading? Nothing else matters.