Home > market commentary > Don’t Fight The Tape

Don’t Fight The Tape

How do you explain the behavior of the stock market today? In an environment where almost every piece of news is bad, how is it that the market was able to rally so convincingly? One possible answer can be found in the sage advice of Benjamin Graham – one of the few true gurus of investing. Graham once remarked that “in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine (i.e. its true value will in the long run be reflected in its stock price).”

What this means in the context of today’s market action is that investors have voted, and in the short term the bulls have won. The debt ceiling will be raised, the European banks will not disintegrate, and the current earnings season will not bring any nasty surprises.

But in the long term, the market will weigh the evidence and perhaps reach a different conclusion. The lesson to be learned from this is that betting against the momentum of this rally can be hazardous to your portfolio. Our model portfolios remain fully invested in stocks, and as uncomfortable as this may be, we remain steadfast in our commitment.

  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: