January 3, 2014

The markets have had a pretty good run since the great recession of 2008. However, The Grinch believes that the stock market is getting quite frothy at these levels and here are some of the reasons:

History of Dow Jones Industrial Average Decline




-10% or more

About once every year

October, 2011

-15% or more

About once every 2 year

October, 2011

-20% or more

About once every 3.5 years

March, 2009

            Source: Capital Research & Management, Inc.

The last significant market decline of 20% or more occurred in March of 2009. According to Forbes, the current cyclical bull market is more than 4 ½ years old and cyclical bulls last 3.8 years on average.

In late November, The Wall Street Journal wrote that a poll of investment newsletter writers put the percentage of bears at 14.4%, the lowest level since 1987. Then came the October ‘87 market crash. The Grinch sees more and more people jumping into the stock market fearing they are missing the train. Following the crowd is like looking in the rearview mirror to steer your car.

There are many other signs that we are at or nearing a market top. No one knows for sure, but the Grinch “feels” that we are at a top.

This is a very negative letter to start the New Year. However, we feel that it is the responsibility of our firm to protect your assets as best we can, and now is a time to be cautious.

In the next newsletter we will look at the glass as “half full” and give you reasons to be more optimistic.

What to do now: sit tight and don’t make any drastic moves either way. We will be watching and monitoring the situation.

Happy New Year! Let’s hope the Grinch is wrong!   



Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Edward J. Kohlhepp, Jr., CFP®, MBA

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.





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Kohlhepp Investment Advisors, Ltd.
3655 Route 202, Suite 100
Doylestown, PA 18902
Phone: 215-340-5777
Fax: 215-340-5788

Securities offered through Cambridge Investment Research, Inc. a Registered Broker/Dealer, Member FINRA/SIPC. Investment Advisory Services offered through Kohlhepp Investment Advisors, Ltd., a Registered Investment Advisor. Kohlhepp Investment Advisors, Ltd. and Cambridge Investment Research Advisors, Inc. are not affiliated.

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