We've had a heck of a run in the stock market these last six months. We have steadily drifted higher without any significant interruption. Everywhere I would go, friends or family members would say "How 'bout that market? It's really on fire!" While I was glad to see this enthusiasm, and happy to know people where making money, I knew what would eventually happen. I knew that at some point the market would cool off. I knew we would either have a pull-back or spend some time grinding sideways to work off this recent upward move. There was no point in trying to guess when it would occur. In fact, many pundits, traders, gurus and analysts spent the last five months unsuccessfully calling the top - as they so often do.
For the past two weeks we have seen a return of volatility in both the stock and bond markets and sentiment in the media promptly turned negative. This is why I always advocate that you should have a long-term investment plan in place, and be patient and disciplined in sticking with your plan. When you are in the middle of a market correction it's very easy to forget how good the last six months have been (the last four years, really). It's easy to get caught up in the moment and lose sight of your long-term goals.
For a healthy dose of perspective, see the chart below of the S&P 500. The small circled area is the recent market pull-back. Look how small it is in relation to the overall market trend. Yet it dominates the news and has investors questioning their entire investment thesis.
The takeaway: keep your eyes on the prize - successful investing is a marathon, not a sprint.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).