By Kris Sayce, editor, Casey Daily Dispatch
This is what a bull market looks and feels like…
It doesn’t rise in a straight line.
It goes up… then it falls.
With any luck, it goes back up again.
You get months like September, when the S&P 500 fell 4.8%.
And you get months like October, when the S&P 500 gained 5.7%.
Here’s the big question: “Is the bull market over, or are there signs the economy and market will keep growing?”
We’ll give you our take on what to do in either case…
If this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.
At the Dispatch we have two goals:
To introduce you to the most important investing themes of the day, and
To show you how to profit from them.
We do this by showcasing ideas from our cast of in-house investing experts, Dave Forest and John Pangere. And from the founder of our business, Doug Casey.
Today, we’re looking for signs of whether this bull market will end… or if it will keep growing.
Why Worrying About the Market Can Be Healthy
If you recall, at the start of September, we warned you that month was historically the worst for stock market performance.
History didn’t let us down. From what was then an all-time high on September 2, the market fell to the recent low of 4,300.46 exactly one month later.
Yet, we explained that as bad as things would look that month, it was not the time to sell.
In fact, we said you should use the expected slump as an opportunity to buy.
If you followed that advice, you should be in a good position now. The market has recovered. And again, stocks are near an all-time high.
Despite that, investors still worry. So… should you?
Well, as we see it, worrying is all part of being an investor. In fact, there’s a saying about it… that the market “climbs a wall of worry.”
That’s true. Investors always have something to worry about.
But worrying about the state of the market is healthy. Hopefully it prevents hubris. It cuts the chances of you making costly mistakes.
The only time that worrying about the market becomes a problem is if you worry so much that it causes mistakes. That it causes you to sell too soon, or to not invest at all.
Proof That This Bull Market Isn’t Over Yet
Now, for much of the past few months, the headlines have given investors a lot to worry about.
The chip shortage… COVID-19… whether there could be a “third wave” (or are we up to the fourth wave?)… the potential collapse of Chinese property group, Evergrande… and of course, the never-ending trade war with China… and so on.
But with all the worry, it’s easy to miss the good news. The stories that suggest it’s way too soon for investors to cash in just yet.
Take two headlines from today’s Wall Street Journal:
“How UPS Plans to Hire 100,000 People in a Month”
“Pilots Are in Demand Again, as Strained Airlines Go on a Hiring Spree”
Yes, we know there are also stories about firms laying off workers because of vaccine mandates. But neither UPS nor FedEx has issued company-wide mandates.
So this isn’t a case of them backfilling roles where they’ve had to fire people for not getting the vaccine.
This tells us that UPS in particular is planning for what it sees as a bumper holiday season.
And it’s not the only one. As the Financial Times reported last week:
Employers in the world’s largest economy added 531,000 jobs in October, above the upwardly revised 312,000 positions created the previous month and closer to the roughly 580,000 monthly average seen since the start of the year. Economists had expected payrolls to increase by 450,000.
The holiday period is always a strong time for job growth. The latest data confirms that. Companies are hiring. We can only think the private sector feels good about the next few months, at least.
What’s more, from a market perspective, the period from October through January is historically the strongest time of the year for stocks.
Here’s How You Play the Bull Market’s Next Phase
So you add those together and it tells us that, as much as there may be the temptation to worry about the economy and markets, it’s still too early to sell.
As always, that doesn’t mean you buy anything and everything. It doesn’t mean you should ignore risks. And it doesn’t mean you should stop worrying. As we noted earlier, worrying can be healthy when it comes to investing.
But what it does mean is that if the data’s right, if businesses are right (based on their hiring plans), and if history is right, the next few months are a good time for stocks.
In which case, how do you play it? The answer will come as no surprise. Whether it’s a bull market or bear market, and whether we’re worrying a lot or just a little… we always stick to the Casey “10 x 10” Approach to investing.
That means spreading your investable capital across a range of calculated speculations in diverse sectors and asset classes. We’ve outlined exactly how that strategy works in this essay here.
You won’t find a better strategy for investing in today’s market.
Editor, Casey Daily Dispatch
P.S. One of our favorite investment types for the Casey “10 x 10” Approach is a little-known asset class called warrants.
Why? Because warrants are a true asymmetric bet. In the 10 x 10 Approach, we’re looking to invest into opportunities to make 10x or more… And with warrants, you only need to invest a fraction of the capital you would in a regular stock to see that type of gain.
It’s a terrific way to play the market. If you haven’t checked it out yet, we suggest going here for the full details.