Don't Listen to the "Experts"

Winter is here....especially if you live in Buffalo, New York. Didn't fall just start a few weeks ago? As the snow in Buffalo continued to pile up, the stock market looked like it was stuck in a snowbank. Each day that the market went up, it did so minimally. While that fact may frustrate us, the stock market has also not had a large down day in almost a month. In spite of this market "sleepiness", the S&P 500 closed at another all-time high on Thursday. Slow or not, the S&P 500 at an all-time high is usually something that makes investors want to move more of their money into stocks. So I was more than a little surprised when I read in a recent research report from Wells Fargo's chief economist that U.S. households are putting their money into investment grade bond mutual funds. As a matter of fact, the amount of money flowing into these funds has risen dramatically - in spite of expectations that interest rates will begin to rise soon. Is it just me, or have the "experts" been expecting interest rates to rise for more than a year now?

Many predictions are made throughout the course of the year, and they are made by people both very smart and very well versed in their particular fields of study. Sometimes this expertise works against them. Experts can get it wrong too. The best of them adapt quickly upon realizing it though. As we are all far too familiar with, even the best of meteorologists get it wrong from time to time, and so when we open our front door to an unsuspected snowfall, we adapt to the scenario, generally by going back inside and putting on our boots. In our day-to-day lives we regularly adapt, but in our investments it is all too easy to buy into a story or a concept that is simply rejected by the reality of the market. When managing client portfolios, I continually adapt, as I know I will be wrong in any number of investment decisions over the course of my career. It is okay to be wrong, in fact its inevitable. But it isn't okay to stay wrong. While U.S. households are piling into bonds because their "gut" tells them that the stock market has gone up for a long time now, I continue to follow my indicators. These indicators are based on the irrefutable law of supply and demand and not on the predictions of so-called experts. Currently, bonds are not an asset class that should be overweighted in your portfolio. My indicators continue to say that U.S. stocks and international stocks are currently the strongest asset classes. Rest assured that these indicators, not "market experts", will tell me when that is no longer the case.