No. of Recommendations: 6
And to add backup from Josh Brown's latest email:
The chart above shows what historically happens after the the S&P 500 goes up more than 10% (in turquoise) during the first half of the year. This is juxtaposed with what happens after the market finished the first half up less than 10%. The takeaway is that a strong rally in the first half usually leads to higher returns in the second half than normal. This is infuriating for people who spent the first half waiting to buy. You’re telling them “Now you’re really going to chase.” And nobody wants to hear that....
But strength begets strength most of the time. The evidence is right in front of your face, whether you like it or not. This is one of the hardest concepts for people to get comfortable with if they don’t know the history....
n fact, markets do not fall simply because they have risen. They fall when they fall. There’s no schedule, the would-be dip-buyers eventually learn, much to their chagrin. There is a momentum to a trending market that can defy everything we deem to be logical or within the realm of possibility....
In 56% of all years, the S&P 500 makes its peak for the year in either December or a few weeks later in January. This is the result of that chase. Again, not witchcraft, just people reliably acting like people act. Year after year, era after era. The data used to create the chart above encompasses the period of time between 1950 and 2024. That’s three quarters of a century of behavior. You could make the bet that - suddenly - people will stop acting as people always have, but that’s a low probability bet.
FC
