This is a Bear Market Rally
That’s the way I’m calling it. I did take a little off the table, using the opportunity to liquidate and roll-over an IRA. This is actually a divergence for me, because in a sense I usually try to bet against my predictions, perferring age-old rules of investing. The Talmud says “1/3 in real estate, 1/3 in business, 1/3 in cash.” Wall Street, in its saner moments, says “your age in bonds.” Interpreting the Talmud’s “business” to be a portfolio … that reduces to 1/6th net-worth in stocks and 1/6th in bonds for a 50 year old. I’m under-allocated in stocks and real-estate by those rules. So I’ll have to start measured investments back into stocks, probably using some sort of automated rule (Dollar Cost Averaging or Value Averaging) starting in November or so. After all, another old rule is “Sell in May, go away.”
Supporting my logic, some guy at the Financial Times:
Bear markets typically end with a whimper rather than a bang, casting doubt on the latest recovery according to Hussman Econometrics, which analysed numerous US market bottoms and bear market rallies. With the exception of the 1987 crash, the month before the lowest point of a downturn saw a gradual descent. By contrast, bear market rallies were preceded by steeper declines and had sharper rebounds. Another characteristic of bear market rallies has been modest volume on the rebound compared to the decline. The current recovery fits the pattern of bear market rallies in terms of volume and the “V” shape of the trough. Analysts at Bespoke Investment Group noted that there have been only seven other periods in the past 110 years with rallies of similar magnitude for the Dow. Three preceded the Great Depression, three came during the Depression and one in 1982.
I hope I’m not filtering by confirmation bias too terribly. This is what I expected of the rally, and I really think that investors should be more fickle, more interested in abandoning their predictions that supporting them.