Savvy investors always think about 'what if' scenarios. Thinking about Plan B or Plan C and making appropriate risk adjustments in the strategy is what separates wheat from chaff. Being attached to the reality and understanding the truth that nothing lasts forever under the sun is much needed to accumulate long term equity gains.
There are many reasons why markets are ignoring the reality of slow growth and keep on chugging higher. You can blame it on endless cheap money supply a.k.a but there is something else is also at work and that is the huge change in investor psyche.
How investors mindset has changed in last 7 years and that is leading the market to ridiculous levels of valuation?
In the age of split second information flow, ideas spread fast. Everybody seems less concerned about equity market fall. Why? because virtues of long term investment in stock market is being touted everywhere and they are being advised not to fret about 10/20/30 % fall in equities. Rather such dips are being considered as BIG opportunities. To support this argument, they have recent historical evidence. So panic selling which used to create domino effect to roil markets is absent these days. Investors are more comfortable seeing red numbers in their portfolio dashboard because the excitement of 10 fold gain in coming years, help overcome the current anxiety about near term losses. This huge mental change will keep supporting the market until something changes drastically.
... cont..Part 2