This chart is titled S&P 500: Current Bear Market by its author.
He calls this whole period a BEAR Market as the S&P 500 is still off by 30.8% from its Oct. 2007 high.
I would argue that the BEAR Market ended on March 9, 2009. Since then the S&P 500 is up 60.2%.
If you remained bearish after March 9, 2009 you’ve either suffered great losses [by being short] or missed tremendous opportunities for gains on the long side. 17 months of better than 60% gains is a hard swallow for me to be classified as a bad market.
Seven months into 2010 all major indices are close to were they started the year.
July 2010 was the best month for the DJIA since July 2009.
The average investor only feels comfortable buying stocks and equity mutual funds when the market has already gone up. Conversely, they are big net sellers only after significant drops.
Just a quick look at the mutual fund charts below and then the charts of the indices tells the story clearly. The red bars track the equity fund flow while the grey ones represent the net inflow/outflow from all bond funds.
The top chart represent data from January 2007 through May 2010 while the market charts are for the last 12 months only. Note the heavy equity mutual fund withdrawals at major low such as Oct- Nov 2008 and Feb. - Mar. 2009.
NOTE: The chart of mutual fund money flows runs for the period Jan. 1, 2007 - May 31, 2010 while the market indices charts are for the past 12 months only.
Active investors do the opposite of dollar cost averaging. They buy fewer shares at low price and more shares when stock prices and fund NAVs are high.
Now that the current month has started off with two good weeks I’d expect that we’ll see renewed buying once the end of June figures are released. Human nature, combined with greed and fear, are tough hurdles to overcome when seeking excess returns.
Media reports and financial service firm advertising contribute to the public’s poor choices. Every day lately I see and hear ads trying to sell silver with the tag line “Silver has more than doubled over the past two years. Don’t you think that spells opportunity for great returns?”
Think about what they’re saying… “You now have the chance to pay twice as much as what others paid less than 24 months ago for the same thing. What a great time to buy!”
Dr. Paul Price
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