A Bear Market Rally?

Mixed markets often lead to a debate over the primary trend.  Bearish pundits insist:

This is just a bear market rally.  It can be sharp and strong, but overall conditions are still bearish.

Bullish pundits suggest the opposite:

There is a strong bullish trend.  Some dips occur, but these are merely buying opportunities.

Both traders and investors should be asking whether this debate is even relevant.  There is no actionable difference; it is just semantics.  In a market which has both ups and downs, and that means most of them, it is pretty easy to make an argument either way by your definition of the time frame.  If you go back to the height of the Y2K days, I guess you can make the subsequent era seem bearish.  If you go back more — or less! — it seems like a bull market.

This is a pundit’s paradise.  Whatever your viewpoint, you can support it with data.  This is worse than unhelpful.  It reinforces the known cognitive biases of investor by providing apparent authoritative support for their error.

Trading and Investing Implication

The “bear market rally” debate is irrelevant. Traders should be interested in the next ten minutes, while investors should care about the next ten years.

Financial publishers always like to emphasize “actionable investment advice” and that is part of the problem.  This argument has the illusion of relevant information.

Sometimes (often?) the best investment advice is to ignore pundit pseudo stories.  The insightful investor understands how to tune out the noise.

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  • Tony LeClair March 18, 2016  

    I enjoyed the post for insightfulness and brevity. I’m up 5% to S & P Y-T-D, and am sitting on extreme levels of cash (TSP ‘G’ takes the pain out of that). Some of my positions are ‘lifetime’, so as you said, Bull or Bear is irrelevant. I’ve already taken profits where I’m tactical, and if the S & P goes up 8 to 10% I just might fall behind – why would I care.

    Love your work – your full on reads are a lot for me – but so much gathering of data, ideas and links that I just thought I’d pop in and say thanks.


    • oldprof March 18, 2016  

      Thanks, Tony!