Halloween, Stock Market Acting Psycho

I hope you celebrated and enjoyed today. The Stock Market is certainly acting like it's Halloween. Why is it acting like it is psycho where it goes down even with good news? Normally when this happens some large issue looms in the darkness.

Earning season is in full swing and most companies are reporting better than anticipated earnings and projecting that revenue and earnings will continue to increase as the economy is improving. Almost all companies are upbeat about the future. How did the Stock Market celebrate this good news, mostly by going down, very strange.

On Thursday, the GDP growth for July through September was 3.5%, better than anticipated and the Stock Market rose 2%. On Friday, other economic data is issued that is in-line with expectation and the Stock Market dropped 2.5%. Lots of experts gave their justification for this psychotic behavior, none made sense to me. The only thing that makes sense to me is fear in the overall business environment associated with uncertainty with health care legislation. I am not sure how effective the proposed 1900 page legislation will be but the lack of clarity makes investors nervous.

What does a smart investor do when things get unclear, stay with the plan. Perhaps you saw the news that the average 401(k) account balance has recovered and returned to the level of 2007. The joke of the 401(k) being a 201(k) is no longer true. How did this happen? Investors stayed with the plan, kept buying when things went down, aka on sale, and made lemonade from a lemon.

My guidance during the last few weeks has been that the Stock Market has a floor and that the rate of recovery would be more normal going forward. We are entering the next phase in the business cycle and companies are announcing plans to hire people. The news in the local paper suggests that the unemployment rate will be coming down sooner than later. While the Stock Market may decline further, it will be NOTHING like what we have already gone through, so relax. The Stock Market will recover in the long term and a higher high should be reached in a couple of years.

Bottom Line: Stay with the plan and relax. Keep investing using a business cycle strategy and avoid the noise and you will be rewarded in the long run.

I mentioned WWEE and investing in it. The data from companies in this segment showed this trend is alive and well, wireless traffic continues to grow around the world. Also a recent FCC ruling on Net Neutrality, probably the most significant unreported news this year, that keeps special interest barriers from internet growth will keep this trend alive and well.