Don’t Get Out Over Your (Water) Skis

Don’t Get Out Over Your (Water) Skis

By • • Stock Market Investing During last week’s July 4 festivities in my backyard, as I grilled my famous Tandoori chicken, the assembled family discussed the state of the economy and their portfolios. With the second half of the year underway, there are plenty of reasons for investors to wave the flag and cheer. In the U.S., gross domestic product growth in the first quarter posted a robust 3.1%; unemployment hovers at 3.7%, a 50-year low; and the major stock market indices have broken record highs. For the first six months of 2019, the S&P 500 returned 17.3%. The adults at my July 4 get-together — all of them red-blooded patriots and retail investors — should have been happy about their future investment prospects. But worry was pervasive. Here’s what I told them and I’ll repeat it for you: Re-balance your portfolio toward safer havens, such as utilities and real estate; keep plenty of cash on hand; and pocket at least partial gains from overpriced media darlings (e.g., brand name Internet stocks) that have already enjoyed big run-ups. Celebrate the bull market; enjoy the summer. But don’t get too far out over the tips of your water skis. Cognitive dissonance… Psychiatrists call it cognitive dissonance, the mental discomfort experienced by someone who holds two or more contradictory beliefs. It’s a form of psychological stress that can paralyze decision making. Accordingly, the economy is sending dissonant signals, which makes it difficult to position your portfolio for the months ahead. […]

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