The Streak

The best thing can happen for the continued advance of the US stock market would be a break in “the streak”.  The streak draws too much attention to even trivial up-days – where the Dow is up barely 5 points but everyone hears the headline about how many new highs we’ve printed in a row and assumes there’s some major speculative mania underway.  All you hear is “LONGEST CONSECUTIVE RUN OF POSITIVE CLOSES IN 17 YEARS!” And it makes motherf***ers crazy.

It also brings out all the old superstitions – Step on a bee, underperform the S&P! Walk under a ladder, your diversification won’t matter! Then we get the comparisons to other historical streaks – just like we do in professional sports. Stats with no meaning to today’s environment get dredged up and grown men stop showering. Next thing you know, Art Cashin grows himself a playoff beard and long-only mutual fund managers start abstaining from sex.

The streak is poisonous, it messes with the collective mind – whether in sports or business or otherwise.

I have a few quotes in this morning’s New York Post about the underpinnings of the rally, nothing you haven’t heard already. I try to convey what the streak will do to the mindset of asset allocators and individual investors as they make future decisions based on recent history:

“A lot of money is shifting around,” said Joshua Brown, of New York investment adviser Fusion Analytics.

“The view that equities have more potential than bonds is going to be powerful going forward,” he said.

There’s still more room to advance, Brown said, pointing to a housing recovery that still has a ways to go.

“Stocks don’t have as big of a wealth effect as houses do,” he said, adding that stability in housing prices is probably the biggest positive in terms of consumer confidence.

It is undeniable that the employment and housing issues are improving with almost every new data point. Last month’s uptick in temporary workers was a welcome development, it means businesses are letting go of the idea that they can grow and keep staff at recessionary levels forever. Upward pressure on wages would be nice, at least it could offset the effect of the new payroll taxes now taking a bite out of sub-$100k annual incomes.  But just because there is improvement, that doesn’t mean we’re out of the woods. Three years in a row – right around this time of year – we’ve seen a resumption of the Euro Crisis rattle our markets and there’s no reason that couldn’t happen again in 2013. We also have this exit crisis looming somewhere out in the future – we have no idea how markets will react to the downshifting (or outright removal) of ZIRP and stimulus.

But so long as Europe is quiet and the Fed is still hanging back, US stocks have nothing in their way. And so the streak continues as does the fascination. Ten days and counting of positive closes.

I’d love to see it end and the spotlight shone elsewhere.

Source:

Dow keeps roaring as streak continues (New York Post)