When things are good you worry they’re going to turn bad. And when things are bad you worry they’re going to get worse. This is why bears sound insightful and bulls sound oblivious.
If I asked you to list all the reasons to sell, they would be as long as a CVS receipt. For example:
A second wave of COVID-19
Stocks have come too far too fast
Supply chains struggle to come back
Too much corporate debt
Too much sovereign debt
High valuations
Unsustainable profit margins
Euphoria
Day traders acting like this is easy
Fiscal stimulus dries up
Corporate real estate goes bust
Student debt
Pension shortfalls
Municipalities hit by COVID-19 hurting revenue
The Fed takes away the punch bowl
If I asked you to list all the reasons to buy, you’d be hard pressed to come up with much of anything:
Umm. Hmm. Stocks are going up so I hope this will continue?
No, really, what’s the bull case? I don’t know, but this is my point. Struggling to come up with reasons to buy is not unique to 2020.
We feel losses harder than the we feel joy from an equivalent gain, so in order to protect ourselves from pain, we want to know all the things that can go wrong. “Oh, the world is going to end? Please tell me more.”
I was looking forward to updating this chart, but never in a million years did I think I would do it this quickly.
Who knows where stocks go from here? This chart might look very different in six months, because ____________. After all, there are always reasons to sell.
Michael Batnick is a managing partner at Ritholtz Wealth Management. He is the co-host of Animal Spirits, What Are Your Thoughts, and The Compound and Friends. For disclosure information please see here.
Get a Full Investor Curriculum: Join The Book List
Every month you'll receive 3-4 book suggestions--chosen by hand from more than 1,000 books. You'll also receive an extensive curriculum (books, articles, papers, videos) in PDF form right away.