Which brings us back to time frames. 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.
Brad McMillan is the chief investment officer at Commonwealth Financial Network, the nation’s largest privately held independent broker/dealer-RIA. He is the primary spokesperson for Commonwealth’s investment divisions. This post originally appeared on The Independent Market Observer, a daily blog authored by McMillan.