The U.S. stock market’s rally since late March has been hard to take for many people—including those professional investors who stayed pessimistic too long and missed out on much of it. There’s a rueful saying among traders that markets will move in whatever direction that will cause them the most pain.

The Federal Reserve put a floor under the market in March—snatching away the opportunity to get stocks at bargain prices—by liberally making loans and buying bonds. That mattered more to investors than record job losses did. But, there are deeper reasons to worry about this rally. And that was reflected on Thursday when the market sharply dropped on Fed Chair’s comment that it could take a long time for the economy to recover from the recession.

So, where does this leave us? Is the market going to take another major correction or is the selling done and we will be back to seeing a bullish stock market?

Future Wealth’s View

As the saying goes “No one asks why when you’re making them money.” Bernie Madoff will attest to that from his cozy 8×10 cell at his permanent address at Butner Penitentiary in North Carolina.  Just last week, we highlighted in our article, the foibles of momentum investing from new investors who have hardly any knowledge of the companies that they are investing in but claim to be the next Warren Buffett. The link to the article is here –

The fact is that pullback was inevitable because the fundamentals weren’t supporting the levels of return that investors were expecting. The harsh reality is that unemployment remains very high, deaths from the virus continue to mount, companies are not hiring enmasse to previous levels and most importantly, life is not back to normal.  Now, why are we not hearing these warnings from the administration? Because, telling the truth is a key point in the crisis and we are not hearing the truth.

If you are not seated at the table, then you are on the menu. Be careful.