The stock market hit all-time record highs again in August, but despite the +6.2% move in 2016 S&P 500 stock prices (and +225% since early 2009), investors continue to scratch their heads in confusion. Individuals continue to ask, “Huh, how can stocks be trading at or near record levels (+6% for the year) when Brexit remains a looming overhang, uncertainty surrounds the U.S. presidential election, global terrorist attacks are on the rise, negative interest rates are ruling the day, and central banks around the globe are artificially propping up financial markets (see alsoFed Myths vs. Reality)? Does this laundry list of concerns stress you out? If you said “yes”, you are not alone.
As I’ve pointed out in the past, we live in a different world today. In the olden days, terrorist attacks, natural disasters, currency crises, car chases, bank failures, celebrity DUIs, and wars happened all the time. However, before the internet existed, people either never heard about these worries, or they just didn’t care (or both). Today, we live in a Twitter, Facebook, Instagram, Snapchat, society with 500+ cable channels, and supercomputers in the palm of our hands (i.e., smartphones) with more computing power than existed on the Apollo mission to the moon. In short, doom-and-gloom captures human attention and sells advertising, the status quo does not.
- Record corporate profits are on the rise
- Stabilizing value of the dollar
- Stabilizing energy and commodity prices
- Record low interest rates
- Skeptical investing public
Fortunately, the stock market pays more attention to these important dynamics, rather than the F.U.D. (Fear, Uncertainty, Doubt) peddled by the pundits, bloggers, and TV talking heads. Certainly, any or all of the previously mentioned positive factors could change or deteriorate over time, but for the time being, the bulls are winning.
Founded in 2007 by Dov Gertzulin, DG Value is a value-focused investment firm. The firm runs two primary investment strategies, the diversified DG Value Funds and the concentrated DG Concentrated strategy. Q3 2021 hedge fund letters, conferences and more The flagship DG Value Fund was launched in 2007, specializing in middle-market distressed situations and event-driven Read More