Chicken Little Respects Dow 30,000

Chicken Little is no longer bearish on US stocks. On January 25, 2018, when the Dow was at 26,252, I wrote the reverse article, "Chicken Little is no longer bullish on US stocks." In recent days, the Dow has rallied to a new all-time high, and this new high has to be respected. 

Chicken Little is no longer bearish on US stocks

Groucho Marx said, "Who Ya Gonna Believe Me or Your Own Eyes?" 

Dow 30,000 

The Dow Jones Industrial Average reached an all-time high last week in November, 2020. Performance is reality. Chicken Little incorrectly thought that the rally from March of 2020 was a bear market bounce and would not hit a new high. 

What now? The Dow ended 2019 at 28,462. On Friday of last week (November 13, 2020), the Dow was 3.6% higher, closing at 29,479. 

It's a chopper baby

The fact that the Dow ended last week at a similar level to where it started the year, hides the psychological impact of the COVID associated collapse and rally. Bruce Willis's character in Pulp Fiction is not able to summarize his experiences. Similarly, Dow down then Dow up back to where it started, does not capture the emotion of 2020 for investors. 

Investors can be put into three categories based on the equity market market decisions so far in 2020. 

BehaviorFinancial ImpactPsychology
Bought the March Dip$ RichI am a genius
Sold the March Dip$ PoorI am an idiot
Polonius - neither a buyer nor a seller beZeromissed opportunity

Chicken Little is in the Polonius category; no significant change in equity position throughout 2020 so no impact on wealth. However, everyone who did not buy near the March bottom has to feel stupid. And, indeed, Chicken Little does feel stupid. 

How long will Chicken Little be bullish? I do not know. Chicken Little always invests on the side of momentum, and therefore cannot be negative on a market that has broken out to new highs. 

November 16, 2020: Dow 29,479

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