In honor of Valentine’s Day, I was going to write about how much I love the stock market. The more I thought about it, though, I realized that “It’s Complicated” is a more accurate description of our relationship. I do love the market, but we have issues.
With all I've written about it, from different angles and different time frames, I don’t think I’ve ever laid out my feelings for the market in a single post. So here we go . . .
Days of wine and roses
Fundamentally, I love the market. There are two main reasons for this: earnings and valuations, which, by no accident, are the foundation of stock prices. After multiple quarters of decline, earnings have started to rise again and look likely to keep climbing at an even faster pace. That certainly makes my heart beat a little faster.
And I’m not the only one who’s smitten. Consumers are feeling the love, with confidence at 16-year highs. So is business, with the ISM surveys well into expansionary territory and the National Federation of Independent Business survey at a 13-year high. Since 2009, in fact, we've had nothing but good times. When something feels this good, what can go wrong?
The inevitable letdown
Well, we’ve been through this a couple of times before, the stock market and I. For many happy years, it seems like nothing can stop us. Then, just when things are absolutely perfect—just when I surrender all my doubts, thinking this time really is different—the stock market blows up our whole relationship, taking my money and shaking my faith.
Am I a fool to think it can work out this time? After all, I feel as good now as I did in 2007 (or in 2000, for that matter). It wasn’t the market’s fault then, was it? Maybe it was mine. If I had just held firm and stood by the market's side, perhaps things would have been better. After all, everyone goes through rough patches, and the market came back on both occasions.
I'll forgive (but not forget)
Still, when all’s said and done, I can’t put myself through that kind of pain again. The stock market and I can be together, but I’m setting some limits this time.
I will continue to put my faith and money in the market, but I'll remember that I can’t rely on it alone. I will keep a diversified group of friends and investments, so that my life and portfolio don’t depend on one person or asset class.
I do love the stock market, and I really hope things are different this time around. At the same time, I’ve been burned before, and even as I hope for the best, I will certainly plan for the worst.
Like I said, it’s complicated.