In the interest of the upcoming Easter and current Passover holidays today’s edition will be quick. Similar to the 1st Quarter of 2021 which seemed to FLY BY!
Market – and my clients’ portfolio – performance was strong to start the year. There is caution in the air, however, as 10-year US Treasury yields climbed to levels not seen since early 2020 before the pandemic began. The swiftness of the rise in bond yields warrants caution in the overall stock and bond markets.
OK, I’ll admit it. Until last week I had not heard of Gamestop – the company or the stock.
Of course, I have now heard of Gamestop and more including Reddit, wallstreetbets, Webull and Keith Gill (Keith Gill was called the “Original O.G.” by one trader*). And as a financial professional I am knowledgeable about what short-selling is and how “the shorts”, as they call traders who sell short stocks and other securities, can get “squeezed”. Gamestop brought shorts, short-selling and short squeezes to an entirely new level.
As Brett Danko, the founder of my firm, recently described it, “the Gamestop incident of last week transcended the world of stock trading… both for major institutional traders and individual traders”. Keith Gill and the individuals trading off chat board messages transcended stock trading similar to how Michael Jordan transcended the sport of basketball and even Muhamad Ali transcended the sport of boxing. These people and events became larger than real life – for a time.
“Do I go to all cash at least until after the election?”
More than a few people have asked me this question over the past several months. Even more people have probably asked themselves this question. The answer, if historical data of the S&P 500 index is a guide, is a firm NO.
The chart above illustrates the impact of missing just the 25 best days in the market, the 15 best, 5 best and 1 best day. The days are NOT CONSECUTIVE, they are random best days. If missed, the majority of stock market gains are missed.
After talking with a number of clients and friends in the past couple of weeks it became apparent that a breakdown of YTD stock market performance would be informative. There are major pronounced differences currently in the various stock categories. An explanation of these differences could illuminate why certain portfolios have gone up (or down) more than others.
Please note that this discussion is not meant to minimize the importance of performance. Performance is critical; however, the time frame of performance evaluation and the concept of progress toward achieving goals are even more critical to successful investing.
The markets are telling us that the Coronavirus situation and the aftermath of an economic slowdown is likely not going away any time soon. The evidence is in the “indiscriminate selling” of nearly every asset class:
A couple of points of perspective to this very hectic open to the US stock markets:
There are comparisons today and the past two weeks to the 2008-2009 financial crisis. The US stock markets were most volatile n Fridays and Mondays throughout late 2008 with financial institution failures that took place over or near weekends – Bear Stearns, Lehman Brothers…and then Merrill Lynch.
With this week’s fast and furious weakness in US and global stock markets – primarily based on spread of the Coronavirus – the next “shoe to fall” likely will be slower short-term economic growth in parts of the US and definitely longer, more pronounced slow-downs in China. These types of slowdowns do happen as a part of market cycles. This situation also got me to thinking about how economic slowdowns, often over decades, have benefited beer and alcohol sales.
Originally titled, “Gut Check in Rocky Markets” but with a new twist the following excerpted edition from the archives of TGIF 2 Minutes is timely on (Not So) Fat Tuesday. Please keep in mind three new factors:
The political divide currently in the US is adding to market tensions and even politicizing the Coronavirus,
Primary Elections and Debates and the policy issues being brought forth are next-to-center stage in the media,
A still very recent UP 29% equity market in 2019,
and there exist the makings of a potential market correction. A market correction is defined as a decline of 10% from a recent high; the US equity markets are down over 6% in two days and are nearing an official “market correction” in 2020.
“Is this the ‘Big Dip’ in the markets they have warned about?”
“Should I be selling my stocks?”
“Should I be selling my bonds?”
Although I stress to clients and friends NOT to listen to the Talking Heads on TV, radio & internet amidst dramatic market moves —and then make rash investment decisions – we are human! It is nearly impossible to ignore completely what is going on daily in the news and markets. And the stock markets have crept down a bit over the past few weeks. (Note, in 2019 the downturns and recoveries have been often.)Continue reading “Gut Check (Again) In Rocky Markets”
It is always helpful to define where stand today and understand a few points about how we got here. So as a sequel to my last post, here are a handful of data points about today’s economy and market stats from the recent past. Several of these may surprise you.