Is This a Good Time To Buy Stocks?

Is this or is this not a good time to buy stocks? The question comes up a lot lately, especially after brave talk of a “patriot rally” preceded a terrible week for the markets. It’s a main topic of discussion on every market-related show, in every financial media outlet. It’s gotten to the point that people even ask me about it. Needless to say, I don’t know the right answer because now as always, no one knows what stocks are going to do next.

But I will say this: To me, it makes a lot more sense to buy stocks now than it did a year and a half ago, when no one seemed to have any doubts at all and corporate America was bursting with confidence and promising astonishing earnings growth. Stocks seemed like a no-lose proposition then. And that was the problem.

Of course, I understand why people—even people who were happy to buy back then—are so hesitant to buy stocks now: It’s scary. The uncertainty is enormous. Who knows how long it will be before earnings start growing again? Who knows how badly consumer confidence has been damaged and how long it might take to recover? Who knows what form our current “new war” is going to take and what strains it might put on the economy?

I’ve been thinking, though, about all the stories I used to read during the peak of the bull market about this or that heroic investor who had racked up obscene returns over a period of many years. A standard moment in such stories often involved that investor having loaded up at some point when the big indexes were reeling, when all appeared lost for the foreseeable future. I’m sure many a small investor read those tales and thought, “Yes, that’s me, that’s what I’m going to do. Run against the herd. When there’s true chaos, when it’s really bad, when there’s no hope, I will have the courage to bet big on equities.”

But this is easier said than done, as many people are currently learning. That’s why so many commentators now are saying, in essence, “We don’t know when it will get better, so perhaps it’s wise to wait.” And perhaps it is. Perhaps (as used to be said with rather different implications) it’s really different this time, and the market will never really recover, or it will take so long to do so that you’d be better off investing elsewhere. Perhaps.

The point, though, is that by the time we know when it’s “getting better,” it will already be better, and the moment will have passed. (Depending on whether today’s rally holds, maybe those same commentators will now say it makes more sense to buy than it did a few days ago, even though all that’s changed is that the price of stocks has risen.) It’s not hard to imagine five or 10 years from now reading the stories about a new group of heroic investors and the great returns they’ve earned; the start dates on the accompanying performance charts might be roughly last Friday. We’ll read the stories and say, “Yes, that’s me. That’s what I’m going to do. Next time.”