Despite a mixed start to the session, the averages were able to wrap up another day in the green and another solid month for the markets as April drew to a close. We’ve seen plenty of stuff for bulls to be excited about, with price action confirming more than any other metric we can point to.
Looking at today’s quarterly earnings, we saw positive investor reaction to names like Domino’s Pizza (DPZ), Aetna (AET), and Starwood Hotels (HOT). On the flipside, investors were a bit more concerned with the earnings numbers from Newmont Mining (NEM) and Cummins Inc. (CMI). Pitney Bowes (PBI) was also hit hard on news the company was slicing its dividend in half. This is a name we have mentioned in the past that could be vulnerable to a dividend cut. Finally, Wall Street analyst upgrades boosted shares of Best Buy (BBY), PetSmart (PETM), and Deutsche Bank (DB).
I remember starting my life as a trader in the mid-90′s. Back then, the Internet was nowhere near as fast as we see now, and the amount of information an investor could consume was very limited (browsing and chatting in stock forums was a must back in the pre-blog days). The one thing that hasn’t changed from my initial foray, however, is how quickly opinions change on a daily basis regarding the current state of the markets.
These days you can easily recognize when someone writing has plenty of exposure in the markets. You will often hear “the rally has more to go” from these folks. There will also be arguments made for valuations being cheaper than they actually look when one factors in the best-case scenario for earnings momentum. However when these same writers take profits, the tone quickly changes to “a market that is way overbought” and “why danger lurks ahead.” It’s the ultimate cat and mouse game when you think about it.
For dividend investors who are interested in long-term performance, this day-to-day stuff, while exciting, will not mean one iota when you look back on the market’s performance. Granted, it doesn’t mean there will be blue skies forever, but it helps to understand the market dynamic for what gets the business media juiced, and that’s simply what will happen in the short-term.
Ultimately, it is up to everyone to find the right approach they believe they can see the most success in. Maybe some of you can handle the constant opinion changes and be able to ride the sentiment train all along the way. Having been there, I can tell you, expect plenty of frustration if you don’t put in a tremendous amount of time to learn the craft of short-term genius.
In the meantime, the most of us will focus on what the long-term picture will look like for individual stocks and their businesses, as well as the overall market direction.