Much was made last week of the Dow breaking through the 22,000 barrier for the first time. While it was cause for celebration in some quarters, like the White House, it’s always wise to exercise some caution when it comes to getting excited over round numbers.
Words of wisdom this week, then, from Brad McMillan, chief investment officer at Commonwealth Financial Network:
“Looking at the shorter term, hitting repeated milestones gets investors excited, makes them fear missing out on gains more than potential losses, and can drive the market higher. With fundamentals solid and earnings rising, there is even a good case for that. Over the next couple of quarters, things look good.
“Over the longer term, though, historical comparisons — based simply on how bursts of gains like this have played out in the past — call for caution. There are other reasons for caution as well, as I have written many times before, but this is a new one to add to the list.
“So, celebrate the good news, by all means. But keep in mind that parties don’t last forever, and hangovers are more painful the more fun you had the night before.”