The American-born British investor and mutual fund pioneer (not to mention legendary philanthropist), Sir John Templeton is credited for many a famous market-related quotation. My second favorite is: “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” Where are we then, on Sir John’s (I like the ring of that) continuum, as the current economic recovery enters its seventh year?
I do anticipate another decent year for U.S. equities (stock) on continued positive economic growth, corporate earnings, low commodity prices and accommodative monetary policies around the world. However, I’m not quite ready to jump on the “optimism” band wagon. Reluctant wage growth, geo-political issues and any unexpected rate action by the Fed could derail recent gains in consumer and business confidence. In light of the anticipated interest rate moves in 2015, fixed income (bonds) should have a hard time matching last year’s performance too. Consistent with long-run results, equities will once again be the place to be. But even though I’m not yet to Templeton’s “optimism” stage, it appears that this bull market in equities has a ways to go.
Oh yes, my favorite Sir John Templeton quote? As with investing in general, perhaps this saying too, is not for the faint of heart: “Buy when there’s blood in the streets.”