The Higher They Climb, The Harder They Fall

It is a remark that I often see when assessing the upside and downside probabilities of various capital market outcomes at any given point in time.

“How can you maintain your bearish view about U.S. stocks when they have performed so well for so long?”

The question certainly makes sense. Given that the stock market continues to go higher and higher, how in my right mind can I maintain the view that the stock market might go down in a meaningful way at some point in the future? But from my perspective, the fact that this very question is being asked provides insight into why stock investors are so renowned for “buying high and selling low”.

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