Bull, Bear or Behavior

Are we in a bull market? It’s anybody’s guess but surely we are not in a bear market anymore.

Are we in the late stage of a bull market? Doesn’t seem so as investors are not euphoric. Read ahead to know my views.

Investors who don’t read financials are facing neither bull or bear pressure but a behavioral issue.

Anyone who hasn’t  bought real estate in the last two years is at present suffering from FOMO despite prices being elevated in various parts of the world where progress is linked to American growth and interest rates are relatively higher than the last 5 years.

There are various reasons to be pessimistic today. Some of them are

1. Rising rents.
2. My friend has bought real estate and I am left behind.
3. Interest rates are still high and can go further high.
4. US elections in 2024.
5. My bond portfolio is still down.
6. I am paying a higher interest rate on my bank portfolio and mortgages.
7. I am unable to sell my real estate at the profit I desire.
8. My 2 years old stock portfolio is just breaking even and I still have to see growth before I top it up.
9. FD interest rate is 5% and that’s guaranteed. The stock market may tank in the next 2 years. Can you take a guarantee?
10. My off-plan and under-construction property needs to be paid first.
11. Due to cost cutting  I have to do 10 people’ job at the office.

Many of them are genuine situations investors are embroiled in. I am highlighting this to focus on markets and not to comment on their individual needs. Everyone has their own right to use their money the way they want.

But this helps me as a full time stock investor to get a sense of where the markets are today.

It’s a perfect condition for the stock market bull to climb the wall of pessimism.

We all are governed by our immediate past and not our distant past. Our inability to see more than 1-3 years is causing us not to flourish in the stock market. The investor’s agenda is clear, they want to make money today.

I remember the days of October-December of 2022 when the S&P 500 index was down 24% from its peak of 4700 imploring investors to top up their equity portfolios. It was a common sense of law of averages ; S&P has a 50 years of history of giving 9% returns. Today the same S&P 500 has climbed 27% from its bottom.

Obviously very few people invested then and now some more will invest but the majority of investors will still not invest in the markets and they will come when the S&P 500 will cross its previous peak of 4700.

The news cycle is still busy with inflation and interest rates and has not yet paid attention to the market. Once the news cycle turns, the retail investors will start to feel the social pressure to invest.

This cycle of fear and greed will continue its churn even after we all  leave this world.

Only contrarian investors who have the gumption to deviate from the crowd will make big money in the stock market since he/she is able to control his behaviour in this long game of investing.

Vijay Kedia rightly put it:“If you are losing in the stock market again and again then you must understand yourself. The only person you need to know to be a successful investor is YOU.”

Let’s take some time to understand our own behavior rather than trying to understand the stock market. Bhagwatam says,“Yat ande tat pinde.” which is loosely translated as What’s inside us we see that around us.

Thank you for reading.