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Another Reason Stocks Could Go HIGHER in 2016

By Dr. Steve Sjuggerud
Thursday, January 14, 2016

Chances are, you're scared right now...
You're afraid the markets are going to fall.
You think the recent fall in stocks is just the beginning... and that all of the bad things lurking out there are finally about to surface.
I get it.
We have some scary things happening right now in the financial markets.
But you need to understand one thing: Fear is good...
You know the old saying... "Be fearful when others are greedy, and be greedy when others are fearful." (Warren Buffett said that... and Buffett is the greatest investor of all time.)
Markets peak when investors are greedy – when nobody thinks you can lose money (like in real estate in 2006). And markets bottom out when fear rules – when everyone is scared.
So my question to you today is simple: Is everyone greedy right now, or is everyone fearful?
The answer is obvious to me... Investors are more fearful than greedy today. And that means stocks can still move higher in 2016.
Let me explain...
We have NOT reached the peak in greed yet. For example, it does NOT feel like it felt in real estate back in 2006, during the last peak in greed.
Back then, no one thought you could lose money in housing. And regular folks were quitting their jobs to get into real estate. It all worked wonderfully for a few years... but then the floor fell out.
The same cycles happen in the stock market. The last two major stock market peaks were in 2000 and 1968, the same years consumer sentiment peaked.
Consumer sentiment has also bottomed five times since 1968. Each of those bottoms occurred when we were in a recession. Take a look:

You might think I talk too much about sentiment... that sentiment doesn't matter that much. This chart shows you that sentiment is important – and that consumer sentiment bottoms out in recessions and peaks at tops in the stock market.
The message from this chart is clear to me: We are definitely not in a recession today. And we are definitely not at a major stock market peak.
Yes, consumer sentiment is getting up there... But it is not time to start worrying.
The simple story is that investors are more fearful than greedy today. Therefore, we have likely not reached the peak yet.
This doesn't mean that stocks can't fall from here. But I'm happy to bet on history. And history says stocks could move higher in 2016.
Good investing,

Further Reading:

"Bull markets don't have an expiration date," Steve says. "They don't have a life expectancy." The U.S. stock market has gone up for seven straight years. Steve says that doesn't mean they're headed for a down year in 2016. Learn why in this essay from last week.
Dr. David "Doc" Eifrig says not investing is one of the biggest mistakes you can make if you want a wealthy retirement. Fear prevents most people from starting... and it also will ruin your financial future. Learn more here.

Market Notes


Today's chart highlights the brutal downfall of social-media company Twitter (TWTR).
Longtime readers know we're wary of investing in "what's hot." We've recently used innovative camera maker GoPro and fitness stock Fitbit as examples. As we've shown, buying what fascinates the average investor is often a loser's game.
Today, we're seeing this idea at work again. Even if you've never "tweeted" before, you've likely heard of Twitter. The free service allows its users to broadcast 140-character messages and follow the latest news and information on celebrities, athletes, and any other person or organization with an account. It boasts around 300 million active users. For a while, it was one of the hottest, most exciting stocks in the market.
But as our colleague Doc Eifrig says, the word "exciting" often comes right before big investment losses. And that's exactly what we're seeing now: Twitter's shares have plummeted more than 50% over the past eight months and now trade at an all-time low. Keep this story in mind the next time you're considering putting money into the latest fad...

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