Pity the young bankers and wannabes now finishing up their summer internships on Wall Street. Young and frisky, dressed like swells and capering about Manhattan oblivious to the dangers lurking beneath the pavement. They laugh at the old-timers with our nervous twitches and superstitions. The better-educated among the new breed have an academic mastery of the dot.com meltdown and Great Recession but market crashes are like earthquakes; if you haven’t actually experienced the sensation of the world dropping on your head you really don’t know anything.
Hubris has to be beaten out of investors. Wondering if the February selloff was going to screw up your chances at scoring a Goldman Sachs (GS) internship doesn’t count.
Hank Smith of Haverford Trust has peered into the doe-like eyes of young Wall Street but he’s not overly worried about their adaptability. “We have a bunch of new hires fresh out of college who don’t even remember the bear market of ‘09 and ‘08 and we’re still shaking,” Smith tells me in the attached video. When he looks at the kids he sees the future. In the case of the millennials that future includes eating out of cat food tins if they don’t start building nest eggs.
Smith has stayed on the right side of the market for the last few years by sticking to a simple premise: whether because they’re too young to know better or too old to trust equities investors remain under-exposed to stocks. As long as the fundamentals don’t unravel (a big qualifier for many) the dips will be short-lived and shallow.
Yes, that includes the present pullback which is still only about halfway to the official 10% drop which defines a “correction.”
Smith has lived long enough to know better than to doubt the potential for a substantial and lasting stock market drop but says the laundry list of concerns cited by bears today aren’t rally killers.
“Bull markets don’t end because of age. They don’t end because of exogenous political events. They end in anticipation of a recession.”
Despite the age of this bull the earnings data and economic figures just don’t portend contraction in Smith’s mind. If Smith is correct then anytime starting about now would be a good point at which to start putting extra cash to work in stocks.
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