"The Future's So Bright, I Gotta Wear Shades"

(with apologies to Timbuk 3 and their 1986, one hit wonder, single !) 

Anybody remember what happened in 1987?

Here is what Investopedia has to say about the October 17, "Black Monday" stock market crash: "The stock market and economy were diverging for the first time in the bull market, and as a result, valuations climbed to excessive levels..."

Stock markets have rejoiced at the recent results of the Pfizer and Moderna vaccine trials and yet again stock market participants have taken their bullish outlook to new extremes: new highs and wildly stretched valuations. Don't get me wrong, I love seeing client portfolios rising in value and I am certain that clients love to see it too, however we know what happens when the majority are bullish and have all bought in (all the good news is priced into the market). New buyers start to be few and far between because most of the money chasing prices higher has been spent: those portfolios become vulnerable to a correction as profit-taking enters the market. Just be prepared (emotionally) for the days when portfolio values start to slide lower.

As our friend and critical thinking strategist David Rosenberg suggested in his morning comment today:

"The new mantra is that November is proving to be the best month the stock market has seen since October 1987! Just a warning because the last time we heard the cheerleaders saying this was back in January of 2018... You would never have guessed that from the end of January 2018 to the end of that year, the S&P 500 was down 11% (and tax cuts were the "game changer" like vaccine treatments are today)."

"My advice is to expect the unexpected"... (where have we heard that line before? See my December 29, 2019 blog)"... and fade the consensus at all times when it becomes a herd mentality in either direction".

My friends, while the vaccines may begin being distributed in the next few months, Covid cases are escalating and the political deadlock to our south is bordering on dangerous.

Clearly there is a good reason to be optimistic on the potential for economic growth for the long-term, but we think that it is prudent to temper short-term expectations:

I study nuclear science
I love my classes
I got a crazy teacher, he wears dark glasses
Things are going great, and they're only getting better
I'm doing all right, getting good grades
The future's so bright, I gotta wear shades