Readers of this column know that I am an optimist. I let the financial media tell you everything that is wrong while I have the harder job of informing you what is right. This “glass half full” approach is always harder because you have to see what others don’t. My emphasis of TINA (There Is No Alternative) is a great example. Some pundits say to sell stocks but they don’t tell you what to do with the money. Sit in a money-market fund earning less than 1%? No thanks. Pay to store gold? No. I’d rather receive stock dividends instead. 

Image Source: Pixabay

This column would be easier to write and probably more popular if I only wrote bearish pieces. For example, The ratio of stock market value to GDP is nearly 300 percent of normal. COVID-19 cases are exploding. The Fed’s zero interest rate policy is unsustainable. The economy is a shambles with unemployment rates well above average. There could be a nuclear war, our debt is too high, Social Security will go bankrupt, etc.

Those are obvious problems and are frequently in the news. But investors see things differently. They look ahead instead of seeing the present. For investors, high market valuations won’t be as high after GDP bounces back, which it certainly will. A year into the pandemic, investors are emphasizing the vaccine instead of the virus. After winter when the economy fully opens up hiring will accelerate. The unemployment rate will fall, fast. In fact, it already has.

You can see that the bearish case is easy and straightforward while the bullish case relies on assumptions and forecasting. 

That doesn’t mean we should just wear rose-colored glasses. There are problems, including those mentioned above. There are always problems. For those 60 and younger, however, it’s important to know that there is more than 100 years of data suggesting a large portion of their portfolio should be in stocks, especially the more stable large-cap dividend payers. For those over 60, own some higher-yielding fixed-income instruments and preferreds in addition to stocks. 

What about buying at the high? If you bought the S&P 500 at the top right before the 2008 financial crisis you’d be up 220 percent today, including dividends. If you bought in February 2020 right before COVID-19 you’d be up 15 percent. Every bear market ends with stocks soon hitting new highs. If your timing is bad and you buy near the top, the next bear market will make it right. It already has.