Last month I wrote a blog entitled “Don’t Panic” on February 5 in which I stated that “I believe that this is simply a long overdue correction in a bull market that began in March 2009 and remains in place today.” As it turns out I was fortunate enough to have written this the day that the correction ended. Since that time, the Dow Jones Industrial Average has risen by 6.2% to within a scant 200 points of its all time closing high. At the same time, the S&P 500, the Wilshire 5000 and the Russell 2000 have all exceeded their old records. Clearly, the Bull Market remains in force and that the modest correction has ended.
So where do things stand now? At this moment, the market is still in a clear uptrend. Almost every major stock average is at or near record levels. Treasury yields have stabilized in the range of 2.60 – 2.80%. The value of the dollar index has fallen about 5% since last July and is currently trading near its low. This is helping to increase the relative prices of gold and silver, as well as other commodities, like crude oil.
So what should we be doing? All things considered, we sit tight but remain vigilant. There will likely be more one-off events like what’s going on in the Ukraine that will cause the market to slide. I believe that one- or two-day events like that can create short-term buying opportunities. Unless there is a fundamental and abrupt change in Federal Reserve policy with regards to interest rates, or if our economy were to quickly worsen, or should there be a major conflagration somewhere in the world, then the stock market should continue to work its way higher.
As for me and my clients, we remain fully invested in companies that are participating in this bull market. We didn’t sell last month and we won’t panic the next time the market drops a little because we understand that markets go up and down in the normal course of things. We are patient investors with the courage of our convictions. That’s how you build true wealth.