I ran into a friend of mine at my favorite local Mexican restaurant the other day.

He’s a successful local painter. He has a beautiful home with a pool, a pond stocked with fish, a fully wired screened-in porch … the works. I enjoy watching football with him there in the fall.

So, it surprised me when his first question to me was: “How do you buy a stock?”

It surprised me because it was a déjà vu moment. It wasn’t the first time this had happened recently.

I’ve received basic questions about the stock market from people with whom I have never discussed investing.

A rising stock market can do that.

This has repercussions for the market — and how we think about it…

That’s Trillion With a “T”

Larry Fink is the CEO of BlackRock. BlackRock is the largest asset management firm in the world. It manages $6.5 trillion.

He appeared on CNBC on April 16 and said some things many didn’t expect.

Most notably, Fink said: “We have a risk of a melt-up, not a meltdown.”

He said we are more likely to see the market move higher than otherwise.

Managing more assets than anyone else has its perks. Fink knows things about the market. And the market — as measured by the S&P 500 Index — has obliged:

SPX Index April 2019

It’s been a great run.

Since the S&P 500 bottomed at 676 and change on March 9, 2009, it is up more than 400% with dividends. That means it has risen 18% per year, on average, in the decade since then.

This rally has some stamina.

So, We Must Be at the Top, Right?

In a word, no. As much as our flawed human logic may want them to, bull markets don’t die of old age. There is no reason why the market’s upward trend can’t continue.

We aren’t even close to the longest bull market in history. The current one is only the fourth longest since 1926:

History U.S. Bear & Bull Markets

It is true that history suggests we are more than halfway through this bull market.

But macro conditions remain favorable.

I mentioned Larry Fink above.

His firm helps clients manage their money and invest in markets around the world.

And today, he sees a record amount of money in cash. He says a chunk of that cash is going to the debt markets.

But he thinks some of it can return to the equity market if investors start to experience FOMO … the fear of missing out.

I know from experience that the easiest way to be fearful of missing out is when you watch the market hit new highs.

It’s the human condition. We see this with our societal addiction to social media.

Nobody wants to miss out.

Still, the pain of the financial crisis is too much for some to bear. Some won’t return to the market. They were burned, and they won’t return.

But some will. They can help the market go higher.

We also have low interest rates … strong earnings … and a belief by many the U.S. and China will reach a trade deal shortly.

Cap it off with the head of the world’s largest asset management firm appearing on CNBC and effectively challenging people to buy equities.

As much crazy as there is in politics today, those are some “Goldilocks”-ish conditions. Until one or more of them change, this market is likely to go higher … because it can.

I Want to Be Clear

Remember, if one or more of these factors change, that could slow the momentum … at least for a bit. But the overall trend is higher.

Your investing friends — and even strangers — may be asking you if we’re at the top. I don’t believe we’re there quite yet.

You don’t have to bet the farm here. But conditions suggest you shouldn’t sell it either.

Remember, from July 14 to August 31 of 1998, the S&P 500 fell 19%. Likewise, from October 3 to December 24 of last year, the market fell just a bit more than that.

Twenty years ago, the market went on to rise 60% until it peaked in March of 2000.

We may be experiencing déjà vu again today … but the market has only risen 26% so far this time.

Maintain your positions, monitor your trailing stops and stay strong.

Good investing,

Brian Christopher

Editor, Insider Profit Trader