Last week was fun, wasn’t it? For the first time in many months we saw some big down days as investors got a little panicky over the potential for higher interest rates, midterm elections, and anything else they got worked up about. Of course, this immediately started all the chatter about what happens next.
Are we going to have a bear market now? Will prices collapse? Should I sell? Should I buy more? What is the stock market going to do next?
If you think you actually know the answer to those questions, you may be a hamster.
Anyone who confidently predicts the next move in the market is either fooling themselves or trying to fool you.
I have been doing this a long time, and the stock market never does what we all think it should. I have seen markets rally on bad news and sell off on good news. While in the long term stock prices will reflect the value of the companies, in the short run it’s more of a psychological soup that often responds irrationally.
Making drastic moves based on your, or anyone’s, forecast of market direction is usually a fool’s errand. You will end up running in place, like our furry friend, and not getting much of anywhere.
If you really want to see what’s going on, you need a much bigger wheel (like a Ferris wheel) that will give you a much better view.