As we enter the final month of the year, the markets advance got me thinking about something known as the “Unstoppable Force Paradox.” While you may not be familiar with the name, you will certainly know the definition which questions “What happens when an unstoppable force meets an immovable object?”
Even Frank Sinatra sang about it in “Something's Gotta Give:”
The paradox arises because it rests on two premises—that there exist such things as irresistible forces and immovable objects. The paradox is that both cannot both be true at same time. If there exists an irresistible force, it follows logically that there cannot be any such thing as an immovable object and vice versa.
However, that has become the general view of the financial markets currently. As discussed in yesterday's missive on excessive exuberance, investors have been lulled into a state of complacency due to a seemingly “unstoppable” rise in the financial markets. Bad news remains good news, and even small drawdowns are quickly reversed sending stocks surging higher.
Eventually, the paradox of what happens when a seemingly unstoppable force collides with an immovable will be answered. Historically, such realizations have not been kind to investors.
This weekend's reading list takes a look at the reasons why stocks could rise higher, and the potential they won't. The question to be answered is “What will you do when the immovable object is met.”
1) Stocks Set For A Santa Rally If No Bad News by Adam Shell via USA Today
“The combination of seasonal strength, strong business fundamentals and valuations at or below long-term averages increases the odds that stocks can continue to rise into the year's end, perhaps as much as 2%, says Sam Stovall, u.s. equity strategist at S&P Capital IQ.
“In support of history, we think the S&P 500 should do well in December,” Stovall says. “Our projection for solid November employment gains (when the results are released Dec. 5), our forecasts for improving holiday retail sales and the prospects for better-than-expected fourth-quarter profit growth should help maintain the market's upward momentum.”
