One of the most compelling times to invest in the markets is when the media are continuing to focus on less relevant issues. For some reason, the media tends to stay stuck in the recent past. These days most analysts are concerned with whether the S&P 500 or the Dow Jones Industrial Average will or will not reach a new all-time record high, or how corporate profit or various global economies are going to grow or contract in 2014.
Almost no one is asking whether recent weakness for high-dividend ETFs indicates that inflation may be about to stage a resurgence. No one is talking about several ETFs of mining companies (i.e.: GDX, GDXJ, GLD, SLV and, XME) who are the top-performing funds of 2014. The early stages of the biggest percentage moves are often overlooked for weeks or months because investors continue to focus on what had previously been the most critical issues. They find it emotionally challenging to switch their attention to something completely different.
Emerging-market (EEM, EWZ) behavior continues to baffle most investors who were so excited about participating in early 2008 and again in early 2011, and were extremely worried about their prospects in early 2009 and late 2013. Notice which times were actually the best opportunities for buying, and which ones for selling, As usual, the ideal times were the polar opposites of what most people actually did.
There is a lot of evidence that 2014 is going to be quite different from 2013. However, most investors are acting as though nothing has changed. The majority of investors and financial advisors are presently in a very complacent space. This recent behavior isn’t anything new. If you look back to the recent past, you can see that investors piled into U.S. equities in 1999-2000, and again in 2006-2007, and yet again in 2013-2014 (except very close to the recent bottom, when we had sudden strong outflows).
One of the interesting ironies of the financial markets is most investors are hugely comfortable whenever they are part of any nearly unanimous consensus and they are therefore on the verge of a substantial financial loss.