Editor's note: You can panic about the "Brexit" or whatever disaster the financial media are talking about lately...
Or you can follow Dr. David "Doc" Eifrig's advice and see it as a prime trading opportunity.
In today's edition of our weekend Masters Series – adapted from the June 10 Retirement Trader – Doc argues that nobody knows where the market is headed... and explains why his trading strategy works whether it heads higher or lower from here...
How to Win in a Seven-Year Bull Market
Over the last seven years, the S&P 500 is up around 125%. Even after the "Brexit" decision caused stocks to pull back, the market has recovered most of those losses... and is still within a few percent of a new all-time high.
Even so, every headline we read in the financial news is negative. Every story is about some "coming collapse" or economic turmoil.
Normally when the market approaches a new high, investors have the opposite mindset – total euphoria. Analysts and pundits clamor over each other to announce higher and higher price targets.
In the 2000 tech boom, with the Dow Jones Industrial Average around 11,000, multiple popular books predicted Dow levels of 30,000, 36,000, and even 41,000. Of course, the market crashed almost 30% from there. Even today, it has only reached 18,000.
I don't remember a single time in my career when market highs were met with such an unfriendly attitude.
It's hard to interpret this mixed combination. After all, a smart investor expects the market to decline when everyone believes it will rise and expects it to fall when everyone else has stock market fever.
You may think that being in such uncharted territory makes it difficult to figure out what to do next. Not for us.
For us, the playbook doesn't change. We may not know exactly where the market is headed, but we have a good idea of how to play it.
Let me explain...
We've now enjoyed a bull market lasting a remarkable 87 months. The average bull market since the 1950s has lasted 51 months.
At seven-plus years, some young Wall Street traders have never seen a serious market decline.
Does that mean the bull has to end soon? Do bull markets die of old age?
No. People feel that after a certain amount of time we're "due" for a bear market or a recession, but it just doesn't work that way.
Recent research tested this idea... that the longer an economic expansion runs, the more likely it is to end. It turns out that economic expansions don't come with an expiration date. A long run of high growth is no more likely to end than a shorter one.
Think of it like the measure of a person's life expectancy.
A 20-year-old man in the U.S. has a life expectancy of 57.7 more years, according to the IRS tables. Statistically, we expect him to live until the age of 77.7. But when that same person celebrates his 78th birthday, what is his life expectancy then?
It's not suddenly "negative." He can now expect to live another 9.2 years, according to the IRS. As you get older, your life expectancy moves with you. When that person hits 85, he has a life expectancy of 5.8 more years.
So the older you get, the longer you're expected to live. Your life expectancy never hits zero. (That is, until you die.)
According to research, the same goes for the economy...
There's always a chance that we slip into a recession, but it doesn't depend on the length of the expansion. As time passes, the probability of recession doesn't rise much. It's stable. An economic expansion that has run for 80 months has nearly the same likelihood of ending as one that has run for 40 months.
So will the market keep going up? The only fair conclusion is, "We don't know." Nobody does.
And that's exactly how we're going to trade it. It's how we always have.
Trading and investing aren't about predictions and reactions. They're about preparation for whatever may come.
We sell options on the stocks of high-quality businesses that we would love to own. Whether the market goes up or down... whether the economy booms or busts... we want to have a wide range of trades that set us up for success no matter what happens.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Editor's note: Thousands of Retirement Trader subscribers are using Doc's strategies to "upsize" their retirement accounts... like Kenneth R., who has made $60,000 in just 10 months... and Kimberly C., who has collected more than $56,000 in less than a year. Learn how you can start collecting huge income streams in Doc's brand-new video presentation – and get started with a special, limited-time offer to sign up for Retirement Trader – right here.