The steady, sizable gains of the past few years have given way to a period of uncertainty - and sense that market risks have increased. Amid such uncertainty, it is easy to forget that the case for stocks is based on their superior historical performance compared to bonds, money market funds and most other investment alternatives. When the newspapers and magazines turn bearish about the stock market, that's a warning sign that stock prices will fall. In fact, a review of the past 30 years of media coverage of the stock market demonstrates that when the headlines are filled with doom and gloom, the market is often close to a bottom. When the media turns bullish, the market is frequently neat a short-term top.
Market volatility keeps getting worse all of the time.
The markets are much more dangerous than they were 20 or 30 years ago. By this measure, market risk has been following a downward trend for the past three decades. After the kind of bull market investors enjoyed in the late 1990s, the law of averages practically guarantees the next few years will be a bad time to own stocks. Even if the market does recover, smart investors can always jump back in and ride the next leg up. Meanwhile, the safest thing to do is to stay in cash.