Buy the Dip: Multi-Year Rebound Shows 'Fear of a Bear Planet' Remains Farfetched
It's easy to reflect and think we could have approached things differently, but now it's clear that the initial fear of stumbling into another major bear market was a bit exaggerated.
Looking back, we tend to view past declines as opportunities once they've been overcome. On the other hand, anticipating potential «future» declines often feels too risky. The focus on avoiding downturns can lead us to miss out on the upsides and significant buying opportunities that come with them.
At the same time, whenever there's an unanimous consensus on something, it's important to start questioning it.
We saw this recently with the widespread certainty of an impending recession that never happened. In early 2023, predictions of a stock market «crash» dominated the consensus.
However, today, the sentiment has completely shifted. Currently, 91% of fund managers expect a short-term (next 12 months) decrease in interest rates, signaling a projected «soft» landing and fostering high confidence in the market.
The S&P 500 has reached a fresh all-time high, surpassing the previous peak of January 3, 2022, in the 4818 range after a gap of 511 trading days (or 747 total calendar days).
Notably, this marks the sixth-longest duration it has taken to attain a new all-time high.
Nasdaq and Dow Jones also reached new all-time highs this week.
Over the past five years, the S&P 500 has posted an 80% performance. This goes to show that patience, once again, has rewarded the long-term investor.
Many individuals made decisions, like staying on the sidelines, influenced by the underperformance of «small caps» and the perception that the Russell 2000 couldn't «keep up.» However, in reality, most sectors, especially the major ones, are performing well.
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