And there are plenty of other similarities this time, too. And each major pullback led to major extremes in fear. Stocks fell in late , at the beginning of , and again once more in February But by the end of the year, stocks started a rollercoaster dive. It was a kick in the gut. Investors had gotten used to consistent gains and easy money in the previous four years.
But stocks showed a crack in their armor, and that caused a major spike in fear. How do we define fear? When stock prices move wildly, the VIX goes up. The VIX spiked during each of the recent falls. Generally, a VIX reading of more than 20 shows fear in the market. In February , after months of record-setting lows, the VIX spiked all the way to Investors hit a patch of fear… stock prices fell… but then they recovered.
They reached new all-time highs and continued to soar during the final stage of the bull market — the Melt Up.
Last December, investors were scared silly. The last time I made a major commitment to stocks like this was back in late …. Back then, I put all of my investable assets to work in stocks — and then some.
I even took out a line of credit on my home and I invested it in the stock market. I doubled my money in 13 months in one particular hedge fund. I cashed out of that fund, repaid the home equity line with the proceeds, and let the other investments ride. I still own one private fund I bought back then. But in January , I put far more money to work in stocks than I did in all of and But when it does, you have to take advantage of it.
I personally took advantage of it in…. The Federal Reserve is hardly standing in the way of an ever more richly valued stock market, maintaining a loose monetary policy even with its Nov. The Fed has kept its benchmark interest rate near zero in the economic recovery from the pandemic.
Colas pointed to the four-year stretch from — during World War II; the four years from — amid the post-war economic boom and Korean War; the dot-com bubble in the five years from — ; and the three-year period from — that followed the global financial crisis and Greek debt crisis. In a world of low interest rates and elevated inflation, investors have been turning to equities for returns, according to Fernandez.
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