The sentiment as of late suggests that many investors have lost their grasp on reality. For some reason the mindset is that bad things cannot happen to the financial markets during an election year. The ignorance behind this is truly blissful, so keep buying up your hot stocks, while the smart money waits for a better opportunity down the road.
Above is a reminder of 2008, yes the long forgotten 2008. The year that rocked the financial markets and changed the financial world. The repercussions of that year can still be felt and in some instances seen throughout the United States. Whats the most entertaining about the above image are the dates located on the upper right. During an election year, the market went down, very far down. I am not claiming that a financial collapse will occur once again, I am only suggesting the obvious, markets do trend down.
There is all this talk on the news and blogs about things being better, that one should throw all their money into the market. What I find most compelling about the proposed arguments is that people are buying into the hype. Of course everyone wants to make money, no one can doubt an investor for wanting to do that. Though the issue lies with the fact that we have been here before, last year. The arguments proposed for why we should keep trading higher have been heard before. History has a tendency to repeat itself. The headwinds exist and I do not need to spell them out for you. No the collapse of 2008 probably won’t happen again this year, but during an election year the market can and will go down. During 2012 the market can and will go down, so buy that downside protection while it’s cheap, because making money is always better then losing it.