Review: Stock Traders Barely Escape Vicious First Half; Bond Traders Cruised

Despite everything that has happened in the first half of the year, the markets have gone up so far.

This article shows how the major US indexes are up for the year (though they did feel the need to include the latest daily move next to charts showing the year-to-date performance of the indexes). The article doesn’t mention the international markets, though. So far this year, the Developed International markets have been down, and Emerging Markets have been up. Overall, however, the world stock market is up on the year so far.

Listening to the media coverage, and looking at all that has happened so far, it’s a little bit surprising that the world market is up. We just came out of the Brexit vote (which ended up not being so bad for the markets), we had the issues in China, the horrible start to the year, and the general gloom and doom from the financial media. But through it all, the markets have done OK.

The article tries to present this as evidence that the markets will keep going up, but it doesn’t work like that. We don’t know where the markets will go – it’s impossible to predict. Markets are based on new information, and how that information relates to the market’s expectations. Roughly half the time, new information will be better than expectations, and half the time it will be worse.

Generally, there are always “good” reasons to predict that the markets will collapse. There are also “good” reasons to predict that the markets will keep going up. The issue is that we just don’t know. What we do know is that historically, long-term investors have done pretty well. If you ignore the short term moves and stay disciplined, the markets have rewarded you. To see how this has worked, take a look at our ebook Investing Through the Decades.

 

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