EMBRACE THE DIP
EMBRACE THE DIP
You casually logged into your account today to check how it's been doing. Markets have been at all-time record highs the last 4 months, and...wait a minute. What's this? My account is down $10,000? Just from THIS MORNING?!?!
Hold it right there, partner. Breathe. Your account isn't going to zero, and you've been through worse before. Yes, can you believe it? Remember 2018? Remember 2008? Remember 2001? This is a drop in the bucket. You're going to be okay.
Sit tight, buckle-up and embrace volatility. It’s good for stocks in the long run. Speak with your advisor before making any changes to your portfolio as these should be based solely on your individual goals and objectives, not on recent market movement. Better yet? Stop checking your account, and know that everything is going to be okay in the long run.
As of this writing, markets continued to fall for their second straight trading day, trading a 6th and 7th session below their 10-day moving average in the last 70 trading days. Said differently, we have have been spoiled with low-to-no volatility 90% of the time since October. The last time markets took a stumble like today and Friday was in early October 2019 and investors didn’t even blink. In May/June of 2019 stocks were down nearly 7% and down another 6% again in July but rebounded in just under a month’s time.
Why does this time hurt more? Well, for one, we have had very little volatility for almost 5 months, so when dips like this occur it can feel worse than it actually is. Media pundits will be quick to point to one root cause, which is always a fools game, such as the corona virus hysteria fear. Another is that people are just simply quick to forget. We are just forgetful creatures - it’s in our nature. So taking this into account, nothing is different. Markets are fluctuating and investors are being humans. Be honest with yourself, do you remember any of the market pullbacks I mentioned above? Be honest here.
WHY YOU ARE GOING TO BE BULLISH WHILE THE HERD IS BEARISH
Apple, Visa, Microsoft, Facebook and Pfizer all report this week. These are some big companies that contribute far more to the economy than any virus can take away. Back during the SARS epidemic of the early aughts, the Chinese economy’s worst quarter was -3% GDP, and don’t forget that China seems to always be in and out of recession. They’re an Emerging Market after-all. Additionally, China is less than 4% of our current portfolio, and you should have a similar weighting to yours, if any.
Breathe.
And remember that there are currently more reasons to be bullish than not. Here's one reason:
Just a week ago, and according to FactSet Research Systems Inc, 72% of companies in the S&P500 that have reported earnings results have had positive earnings surprises and 63% have reported positive surprise revenue results. This is above the 5-year average, showing positive trend. In aggregate, companies are reporting earnings 3.2% above estimates.
Sit tight, buckle-up and embrace volatility. It’s good for stocks in the long run. Stay the course. Speak with your advisor before making any changes to your portfolio as these should be based solely on your individual goals and objectives, not on recent market movement.
TIMESTAMP: 27 January 2020 - 1:00PM EST
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Focus Asset Management to provide information on a topic that may be of interest. Copyright 2020 Focus Asset Management.