Our stock market gave up 1.34% yesterday and there’s growing concern that a pullback is imminent. But one important thing I’ve learnt about share price concerns is that you have to keep it all in perspective. And the best perspective is that the big news stories that the media loves to run with are usually bad ones, laden with fears. But importantly, they’re usually of a short term or specific nature to a company or sector.

Right now, the pullback scenario makes sense in the US context and the following charts show it clearly.

S&P 500 Index (US market)

S&P/ASX 200 Index (Local market)

These are one-year charts. The Yanks are up 26.6% in a year, while we’re up 7.55%. Meanwhile, year-to-date, they’re up 10.08%, while we’re up 2.03%.

So, what’s my conclusion?

The US market could easily cop a pullback, while we don’t need one because we haven’t gone crazy mad buying stocks. However, because we play follow-the-leader, we’d fall with the Yanks. I suspect it will be more a short term, kneejerk reaction kind of selling.

I’m betting this year that our market will have a good one and could actually outperform US stocks, especially if China keeps on the improve.

My analysis is based on the likely long-term story of a stronger China, lower interest rates and a stronger global economy that will be demanding our exports. Throw in tax cuts and the implications of the AI boom (which is bound to cut costs and boost productivity) and it’s hard to see the worst-case scenario of a recession or persistently high inflation hurting my optimistic forecast for 2024 rolling into early 2025.

In summary, I can see a short-term sell off but a longer-term resurgence for stock prices. This week, the short-term worry is that inflation might be sticky and higher than wanted by central banks, which could delay rate cuts and deliver fewer cuts.

But in contrast I like this from AMP’s Shane Oliver on our future inflation outlook. This is what he said last Friday: “Our Australian Pipeline Inflation Indicator continues to point to a further fall ahead and in the September quarter we see inflation falling to just below 3%, 12 months ahead of the RBA’s forecasts”.

If that happens here and, hopefully, in the US as well, then the rate cut scenario will boost stocks, while the AI boom will keep delivering shock positives to the bottom lines of companies.

So, the big watch for short-term market worriers is the US jobs report on Friday. If this says inflation looks to be sticky and not falling sufficiently to impress the Fed, then stocks will fall. But that will create buying opportunities for people like me, who see these persistent inflation concerns as overblown.

Once my view looks believable, stocks will surge again. And because I invest with patience and buy good stocks or ETFs when they look cheap, I can ignore the short-term, scary noise and look forward to when the good times roll again.

On the subject of how often the good times roll for stocks, this is what Investopedia educates us on the positivity of stocks: “Investing in stocks and holding them is one of the best ways to grow wealth over the long term. For example, the S&P 500 experienced annual losses in only 13 of the last 50 years, dating back to 1974, demonstrating that the stock market generates returns much more often than it doesn't.”

If you need more convincing, think about this from Investopedia: “If we look at several decades of asset class returns, we find that stocks have generally outperformed almost all other asset classes. The S&P 500 returned a geometric average of 9.8% per year between 1928 and 2023. This compares favourably to the 3.3% return of three-month Treasury bills (T-bills), the 4.86% return of 10-year Treasury notes, and the 6.55% return of gold, to name a few.”

Stocks can shock and scare you but as long as your portfolio is similar or better than the overall market over a 10-year period, you can average a 10% per annum return, despite some years you could lose 20% but in other years gain 20%.

The lesson is that you have to learn to be patient and ignore those short-term scary stories written by my media mates.