Each week I read a great many stock market, investing, and economic articles from multiple sources. Much of the information that I read is only available to professional investment advisors.
That is what has me concerned the most. The investment professional community is changing its opinion on the U.S. stock markets now.
In the last two weeks, the stock market alarm bell has gone off for many of the largest money managers. Their public message is that the stock market has turned into a speculative bet for traders only.
I read an article this morning that stated the hope that if the big boys on Wall Street could take the stock markets down dramatically, maybe that would get the attention of the Washington D.C. crowd.
The main reason for concern is that the S&P 500 is up almost 50% over the last two years. In that same time period there has been little if any growth in U.S. company earnings.
It is hard for individual investors to know and understand the same investment management concerns. Most stock market investors are too busy with their daily lives to realize when and why the stock market investment tide is turning.
The prices of stocks are always subject to the laws of supply and demand. The forces of supply and demand are always subject to the public opinion of individual stock market investors.
The public opinion of stock market investors is controlled by those investors who have the most money to invest.
If I buy or sell $1000 of stock, I will not have much of an effect on the price of that stock. If a large institutional investor buys or sells $10,000,000 of that same stock, the stock is sure to move one way or another.
Individual stock market investors are always happy to buy stocks at the top of the stock market cycle. At the bottom of a stock market cycle an individual investor is always reluctant to buy stocks.
Institutional investors are just the opposite. They sell stocks to smaller individual investors at the top of the stock market cycle. They have money to invest at the bottom of the stock market cycle.
Right now, the large institutional investors are wary of stock prices. They have not sold yet, but their public comments would lead you to believe that they are ready to sell.
Adjust your stock market outlook accordingly now. Large stock market investors can move the stock markets much more than you or I can.
Ric Lager
Lager & Company, Inc.
