This morning, I came across two separate articles that reflect upon market sentiment one year ago, give or take. The difference between the two is quite pronounced, but both speak to a state of mind that often defines market movement – fear. As well, both speak to the idea that the fear is a relative emotion, only present when one has something to fear, and, in the market, when the boogey man takes his lunch, rationality resumes and the market behaves according to fundamental market principles.
- A year ago, Wall Street pundits and prognosticators were busy marking the 25th anniversary of the great stock market crash of October 1987, and speculating whether it could happen again to a market that had doubled over the prior three years, despite a weak underlying economy.
No wonder last year at this time, certain market oracles attached themselves to the 1987 market crash and were predicting doom for the market. If you recall, for three years, the breathless media had been pushing the big, bad, boogeyman of the Eurozone demise. Those who know the future screamed repeatedly the euro and all of its dependent satellites were doomed. Bond rates were soaring as investors fled sovereign debt. All hope was gone. Thus, to hearken back to the horror of the one-day collapse in 1987 made sense, at least for the wild-eyed wanderers who scream from the hilltops. And then, something interesting happened. One man came out and said enough is enough.
- It was a year ago Friday that ECB President “Super Mario” Draghi stopped the European Debt Crisis dead in its tracks. With one simple sentence, the crisis that had plagued both stock and bond markets around the globe for the past three years ended abruptly.
Mario Draghi simply told the world the European Central bank would do whatever it took to fix the problem and that, my friends, removed the fear. Although Europe is still in a recessionary mode and it still has debt, it no longer suffers from the fear of collapse. In fact, its markets have recovered, bond rates are reasonably low, and it appears to be gaining some economic traction.
Although I am tempted to say, “Oh, what a difference a year makes,” I will not, because in the market, the boogeyman is always hiding under the bed, just waiting to slip into a mind tinged with an ancient fear of darkness.
- Today, with the Dow up more than 2,000 points since last October and trading at record highs, fears are rising that the red hot stock market could be setting up for something sinister once the summer slow season is over.
And, so we have it. Coming to a theater near you this fall, the media masters of horror will release, for the fourth year in a row, another classic tale of market collapse, titled,
Are Stocks Heading for a 1987-Style Crash?
The market might or might not be at record highs this fall. The market might even have experienced a correction of sorts just to rebalance. What it will not do is monumentally collapse from the weight of its own climb.
This week is a big week for data and earnings. Let’s see how that all pans out before we start freaking out about a childhood memory of the boogeyman jumping out from under the bed.
Trade in the day; Invest in your life …
