For the past 10 or 11 weeks it seems like Canadian and US stocks have gone up every day. There have been a few down days, but the rise has been quite steady. Even though I know better, I expect to see another increase when checking each day.
If this trend continues long enough, many investors scared off by the market lows from a little over a year ago will be lured back in. Even higher stock prices would lure in people who have never invested in stocks before.
Few of us are immune to the perverse tendency to be wary when stock prices are low and confident when they are high. Perhaps we can expect the deluge of reports about reducing risk by reducing stock ownership to reverse and we’ll see more commentators talking about the merits of long-term stock ownership.
I find I can never remind myself too often about Warren Buffett’s advice to “be fearful when others are greedy and greedy when others are fearful.” So, instead of going out and spending as though you expect stocks to continue their steady climb, make plans that include the possibility of another big drop in stock prices.