Stock Market: Hopping Procession On Wall Street

(Drivebycuriosity) - The US stock market reminded me last week of the hopping procession of Echternach (Echternacher Springprozession wikipedia ). This is a traditional religious parade in Luxemburg, where the participants jump two steps ahead and then one step back - and so progress slowly. Last week US stocks performed similarly - and so the whole year 2018 so far (charts below). This way the market has been creeping to new all-time highs, without showing much progress.

The movements are caused by professional investors, mostly fund managers, who buy & sell according to news and sentiment. Reports about trade war, interest rate hikes, oil price jumps etc. provoked selling, growing economy and climbing company earnings induced buying. I got the impression that many professionals are buying high (when stocks are rising) and selling low (when stocks are falling), contrary to conventional wisdom. This explains why managed funds generally underperform the stock market.

Being an investor with a long-term horizon I don´t participate in the daily hopping dances. I am just wondering how stupid the crowd of the professionals behaves.