As we’ve mentioned before, CNBC is usually playing quietly on a television so we can glance over and see what the market is doing. Sometimes, it is just as revealing to listen to the anchors and commentators’ reactions to the news rather than the news itself. Last week – on the 27th to be specific – we heard the lead anchor ask her guest, “So, how do we make money in this sideways market we’re in?”.
That gave us pause. Is market sentiment really so pessimistic? Does the public really think the market is flat? Ask your neighbors at the office: “without looking, how do you think the market doing?” Do they think it’s flat or negative? Do they feel discouraged?
For context, the market - the S&P 500 - is up 3.23% so far this year. Just for the sake of argument, let’s assume that the S&P grows at the same rate for the end of the year. That equates to an annual projected return of 7.8%. In other words, a normal, healthy, long-term average rate of return. Have we gotten so used to double-digit returns following the recovery of the 2008 crisis that a normal, sustainable rate of return is somehow disappointing? We worry about a serious disconnect between the expectations and the probability of excessive returns, especially given the low rate environment we are in.