It fascinates me that there is an instrument with the potential to generate enormous wealth – where all you are required to do is put your money into it and hold over a long period of time – and over half of the entire country has no money invested in the market whatsoever.
An article recently published in the New York Times noted that despite the market recording all-time highs month after month, the majority of Americans haven't been able to benefit because they've pulled their money out of their investments. People are afraid of what they perceive to be a dangerous, elevated market, possibly because they saw what a recession could do to their life savings, or possibly just because they saw a movie or read some articles about it.
Another potential reason for the general lack of market participation could be the absolute explosion in cryptocurrency last year. With some currencies experiencing parabolic returns, a lot of younger investors diverted money into Coinbase accounts and watched $500 turn into $5,000. It's hard to throw money into GE when you're being conditioned on 10x returns.
A Market Built on Fear
There are two reasons why I think the market has a lot of room to run way higher, even at levels that could look a little harrowing. The first is that there simply aren't enough people invested in the market currently to cause a real crash. The continuous anticipation of a pullback has many holding cash on the sidelines. It's shocking how many times I've heard "I'm ready to invest, I just need a pullback to get in," and these people don't realize that with less than 50% exposure to the market, that dramatic downside they are anticipating will never come.
The second reason is that there are a litany of catalysts in major industries that will push stocks higher. While at Minotaur we focus primarily on technical set ups, when it comes to general market analysis, it is helpful to look at fundamental factors that drive movement. With corporate tax cuts, infrastructure spending, and the rise in AI and blockchain, there is a laundry list of reasons why companies can continue to grow and increase their efficiencies. There are also a decent amount of industries that are sitting at lows with the potential to bounce back, which would also be positive for the market.
This isn't to say there won't be any downside. It's more to say that the risk of downside shouldn't cripple you. If you waited for a meaningful correction in the stock market, you wouldn't have been able to hop into the market for the entire, incredible 2017, and you would have continued to miss out on a January that has put us only 2% away from where most analysts predicted we would end 2018.
In short, stop being so afraid. Stop letting fear prevent you from building wealth. Stop letting hit pieces from CNBC dictate your decisions. Trust in the process, pick your spots, and trade with conviction. We'll be here to guide you.
- The Minotaur Team