The position I’ve taken in relation to the markets is that much of the fear and even panic has been proven overblown. Trump’s trade actions haven’t led to any catastrophes yet. In fact, the U.S., Canada and Mexico just reached an agreement on trade recently.
However, as we approach the end of 2018, a trend in the markets has become noticeable. Specifically, the stock markets may well finish down for the year, and current December levels are precipitously down in comparison to other years.
Fluctuations versus trends
In other words, what’s currently happening can’t be quickly dismissed as an aberration. In a nutshell, the markets are worried, whether anyone thinks it’s justified or not.
Now, there are a few things to look at when analyzing the current state of the markets. First, and as I’ve stated numerous times on these pages, trying to decipher investor sentiment is kind of like trying to read a crystal ball. It’s hard to make any sense of it, unless you know what to look for.
There are various factors why investors are becoming a bit bearish on the markets. Trump will always be a factor in this. He’s doing things differently, and many people just aren’t sure how it will play out. Although I’ve been rather consistent in arguing that Trump’s actions haven’t been as panic-worthy as some might think. China needs the American market. Trump knows this. China knows this. They both don’t want to blow things up.
Avoid stock-market psychology
Yet, broadly speaking, investors tend to be creatures of habit. Yes, Trump is a habit they haven’t gotten used to yet. But habit also suggests that when markets have increased for a period of time, they’re bound to decrease, too. And so now observers are expecting a decrease and, as I’ve stated before, investing often becomes a self-fulfilling prophecy. If people expect bad things to happen, they’ll try to make bad things happen.
Nevertheless, even with these expectations of a downturn, and even a recession, there are a couple of things to keep in mind. America’s central bank, the Federal Reserve, is expected to raise interest rates yet again, which means one of the world’s most important financial institutions still sees growth in some important sectors, including employment.
Also, in the end, it doesn’t matter if the markets go up or down in the short term. They generally always go up in the long-term. And, if you’re a knowledgeable investor who looks for opportunities regardless of short-term worry or panic, you will find returns that match or exceed your investment objectives. That has always been the case and will continue to be so in the foreseeable future. Just call it a hunch, or historical reality. Take your pick.
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