Talking Points – February 2021

February 10, 2021 – Another Signal Of Market Strength

Often investors fear strength. They believe the market has gone too far and they missed it. That is always a possibility, but we tend to view market strength as a positive signal.

Today’s chart shows that we are now over 60 consecutive days with at least 75% of stocks trading above their 200-day moving average. That sounds like a lot, but is no where near a record level. In fact, most other times when stocks traded above such levels for a lengthy period it was still fairly early in the overall market advance.

Source: Strategas Research

It is always easy to come up with reasons to be concerned about a particular investing environment. Markets can in fact correct at any time and still be in a generally up-trending environment. We would encourage investors to have a risk management plan, but not to be reluctant to invest just because stocks have already been strong.

February 3, 2021 – Most Years Are Positive For Stocks

The longer your time frame, the more likely you are to have positive returns from stocks. Interestingly though, as little as one calendar year has been long enough to have most years be positive. In fact, if we look at this weeks chart, less than 10 calendar years going all the way back to 1896 had what most would consider terrible years for returns.

Looking more closely at the green boxes, shows that all but one year from last decade was positive for stocks. What this means for returns going forward is hard to say, but the broader message is that fighting the long term tendency of stocks going higher is usually a losing battle.

Source: Greg Towner, CFA, CMT