There is a certain quiet lusting taking place among investors for a bull market top. The difficulty in creating a logical foundation for a bull market that, according to popular misconception, should have never been in the first place. A bull market that is perceived as being propped up on an artificial platform, buoyed by monetary stimulus, backed by unreasonable valuations, flying in the face of geopolitical fears. The very same reasons the markets should not have climbed in 2011, 2012, 2013 and so on are being cited today.
Now this is not to say the market will not correct. Every healthy bull market takes on some measure of correction. In fact, given the nature of this bull market, the next major correction to come will likely fool most everyone into thinking it's the beginning of a substantial bear market. There is, after all, much more "data" to hang your hat on if you're bearish, which serves the counter-intuitive purpose of prolonging the secular bull market.
Very simply, it's still too easy to be bearish. It's too easy to look at the numerous valuation measures and determine we have come to far. It's too easy to read the headlines and determine the geopolitical stage is much too unstable. It's too easy to look the monetary policy and determine that the markets won't be able to cope with not having the Fed on their side. It's too easy to look at earnings and determine they aren't growing fast enough to support valuations.
Easy, however, doesn't work. Markets are inherently illogical or rather, difficult. Throwing out logical, easy assumptions to gauge the behavior of an illogical, difficult force is an investor's path to mediocrity. Failing to realize that secular bull markets are an expansionary force is a fatal mistake that investors only seem to grasp in the final stages of a secular bull.
Let me briefly explain. Expansion during a secular bull market doesn't simply take place in the prices for assets. It takes place in every measure of those prices, as well. An average P/E ratio of 25, for example, could be seen as an extremely rich valuation. However, secular bull markets create new realities for what "extremely rich" constitutes. This goes for everything from sentiment measures, to measures of leverage and of course, valuations. They all expand into areas that are intellectually impossible to conceive or grasp. Abstractions begin to take their form in reality.
Therefore, it may be beneficial for investors to begin training their mind in abstract concepts now in order to be able to deal with what is to come. An exercise that is certainly more beneficial than watching red and green ticks.
