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February 9, 2018
The cold, honest truth about the tanking stock market you need to know right now
The stock market tanked. It's been absolutely savage.
It's
the perfect storm. Had stocks not risen by so much during the first 4 weeks of 2018, the current level of the major stock market averages might not seem so unsettling; just a little give back after a strong performance in 2017.
The biggest rise in wages in the last 9 years, as reported by the Government last week, hit stocks like a wrecking ball. It's the spark that led to a chain reaction that inundated the stock market with sell orders. Big bets using leverage-magnifying securities with no room for big downside market swings, computer generated selling, and a rare-for-the-times investor outflow from passive, index tracking ETF's all came together right after stocks jumped to valuations that are typically considered historically high given rising interest rates. Markets professionals, regulators, and investors will be deciphering how this happened for a long time.
Now, is the market earthquake from last week over yet? Yes. But as it's often the case, the tremors that follow are often worse. And unpredictable.
Sometimes the stock market really tells us very little about the future of anything, including the economy. An old Wall Street adage goes "the stock market has predicted 11 out of the last 9 recessions". At the moment, not only does the economy appear to be strong and growing, corporate earnings and revenues have been solid.
I think one of the reasons there hasn't been a panicky feel to this selloff, until now, is because investors were too stunned by the suddenness of it to react. Perspective is needed. Right here. Right now. Because when we're in the line of fire, when we have no time to react and we can't see through the smoke, we only have our perspective to dictate how we behave in the heat of the moment.
- Volatility is normal. Stocks are acting like stocks - flaky, indecisive, and thoughtless. Don't act like a stock. You don't want to be that way.
- The stock market is the greatest wealth generating machine ever created, but it is for those who can endure uncertainty who will reap the rewards. Right now would be a good time to endure. Just saying.
- If you found yourself making drastic changes to your investment holdings during this volatility, it means you're flying blind. You have no strategy, no knowledge of the meaning of risk tolerance, which in turn means you won't have the fortitude to stick with stocks over the long term. Get a strategy. It'll turn these frightening moments into opportunities. At the very least, you'll go from being reactive to being proactive. Remember, strategy is what you do between crises, so you don't have to be in crisis management every time the stock market dives.
- No matter how much the stock market goes up, neglecting to rebalance your stocks/bonds/cash allocation because you don't want to miss out on maximizing gains means you're complacent.
If these perspectives are more basic than what you expected me to say, well, that's the whole point. This post isn't about "the best stocks to buy in a down market". Believe it or not, that would be easy and not too many things that are worthwhile are easy. Here's another old adage that hammers my point: Give a person a fish, they'll eat for a day. Give a person a fishing lesson, they'll eat for life. This isn't a Wall Street adage, but it certainly applies to investing.
Now watch:
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| Interview, News 12, tanking stock market |
Thanks for reading,
Mitch
I opened ClientFirst Strategy, Inc. because I believe that the only way to help my clients potentially achieve their goals is by offering unbiased advice & investment management expertise. To my clients, thank you for your continued vote of confidence. If you are not a client but would like to explore the possibility of becoming one, I invite you to call me directly, visit my website, join my email list, and/or connect with me on social media.
All the views expressed in this report/commentary accurately reflect our personal views about any and all of the subject securities or issuers and no part of our compensation was, is, or will be, directly or indirectly related to the specific recommendations or views we have expressed in this report. This material is not intended as an offer or solicitation for the purchase of sale of any security or other financial instrument. Securities, financial instruments, or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. Prices, values, or income from securities or investments mentioned in this report may fall against your interests, and you may get back less than the amount you invested. The information contained in this report does not constitute advice on the tax consequences of making any particular investment decision. You should consult with your tax adviser regarding your specific situation. Diversification is a method of managing risk and doesn't protect against loss in a down market. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested directly. Past performance is not a guarantee of future results.
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| Mitchell O. Goldberg, AAMS, President | Investment Professional OSJ Manager ClientFirst Strategy, Inc. 290 Broadhollow Road, Suite 200 E, Melville, NY 11747 (D) 631-920-6622 (F) 631-920-6624 (C) 516-818-0338 mgoldberg@clientfirststrategy.com | www.clientfirststrategy.com MissionStatement: To financially empower our clients so that they can achieve their most important goals and to confidently plan for the future that they envision.
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