This is the normal course of events and investors are wise to prepare for both in advance. That means now is a good time for a reality check:
- Is your money diversified among not just among high-quality stocks but also among bonds, real estate investment trusts, inflation-adjusted Treasurys, metals and cash? (Yes, low-paying cash allows you to put money to work when the values get irresistible.)
- Are you running trailing stops behind your stocks to protect your principal and your profits?
- Are you psychologically prepared for the inevitable: the appearance of a nasty downturn?
However, this bull market is not going to end – as the merchants of doom like to claim – because the nation is on the verge of insolvency.
U.S. corporations are enjoying record profits and sitting on more than $2 trillion in cash. The Federal Reserve reported that U.S. household net worth just hit a new all-time high: $80.7 trillion. (Yes, that’s assets minus liabilities.)
The danger, of course, is the large and growing federal deficit. It is truly ugly and I make no excuses for the pols in Washington who have promised voters the moon in return for their votes.
The deficit – at 100% of GDP – is not fatal if Washington gets its act together. Rest assured, however, that won’t happen before November’s elections.
Politics are polarized right now because there is a fierce battle