How advisors rein in overly bullish clients

Wall Street lore says a shoeshine boy gave Joseph Kennedy a stock tip just prior to the great crash of 1929, and it so unnerved the future presidential patriarch that he immediately cashed out his multimillion-dollar portfolio. It was his realization that rampant speculation had gotten so out of control, so the story goes, that eventually led to the establishment of the Kennedy family fortune and ensuing political dynasty.

Apocryphal or not, the story continues to resonate on Wall Street. Whenever bulls start stampeding, speculators emerge soon after, taking retail investors along for the ride. Or for a ride, depending on whether they escape in time.

Alas, whether it’s internet IPOs, collateralized mortgage bonds or meme stocks, bull markets inevitably lead to speculative excess. In fact, some strategists say you can’t have one without the other. In case you missed it, the S&P 500 is now up more than 18% year-to-date and the Dow Jones Industrial Average has risen for 11 straight days. Pretty bullish indeed.

If that’s the case, where are financial advisors seeing speculation in the current bull market? Are their clients taking “flyers” from 21st century shoeshine boys in the form of Uber drivers or TikTok influencers? If so, what are they buying?

“The overwhelming majority of the clients we work with do very little speculative investing. As both a fiduciary and a goal-based investment financial planner, we encourage our clients to invest in such a way so as to maximize their probability for success. Our firm’s mindset is that clients should make their direction match their intention so they can reach their financial destination regardless of the current market speculation,” said Terry Conner, managing director at Prime Capital Investment Advisors.

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