Markets got pasted today of course. I saw where this was the worst single day drop since one of the bad days during the 2020 Pandemic Crash. Ok, so a quick reminder that bad days have happened before, obvious statement. There have probably been more truly terrible market days than any of us could possible remember.
I have no idea when this will end, I don't understand the rationale of what is going on and I have no idea if this will be a serious one or be like the one last August which turned out to be nothing.
People who are selling into this are too late in a way. Yahoo has the S&P 500 down 12% from mid-February high. If the bottom comes down 25% then selling today would look like a good trade but what I mean by too late is that the time to put on defense is when you don't obviously need it or maybe better put, before you need it.
To the person who sold today, what if today was the bottom? It is far easier to endure these types of events when you don't have to be correct about anything in the middle of it. I sold one stock for clients a long the way closer to election because I was concerned that threatened tariffs would really hurt because they're heavy in Vietnam. The last increase of defense was in mid-February when I bought gold.
I've had positions in various types of alts with short duration fixed income as we talk about here almost every day. Most are doing what I would hope they'd do with managed futures being the biggest let down as we've been talking about for a while and today was a rough one too. The green one is a mutual fund and that is Wednesday's price, while the rest are all managed futures ETFs.
It is empowering to put something in place and see it mostly working, you're not going to bat 1.000 but if your strategy is mostly doing what you designed it to do then you need to mostly ride it out, not that there won't be any other action, it depends on how it plays out. The tough part, arguably tougher than now, will be when to start increasing long exposure. Maybe that means selling SH or maybe it means buying something or both. I've bought panic a few times before but not every time.
To repeat from past posts though, the mindset should not be you are buying the bottom but that you are buying low and there is a difference. The S&P 500 was at 6000. If you can buy it at 4500, that is buying low, regardless of whether it goes to 4000 before going back up.
Nate Geraci Tweeted out that "any sort of market, economic, or political “turmoil” offers a window into your financial advisor, portfolio manager, etc…" Tough but fair. If you are an advisor, what are you doing to try to make it better for clients. Hopefully what you are doing to make it better will be effective but at least you're trying. If you're not trying, then what are you even doing? Tough but fair?
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2 comments:
not so sure whether the protection window is closed. A recession is a sure-thing bull killer, and that means -30% is possible any time, if not a lot more. Today's problems are unique in that the Fed has to be slow because tariffs are inflationary, so they'll be late to turn the supertanker around before it runs aground. And with budget constraints, Trump can't just open the fiscal floodgates like he did in 2020.
I find it worrisome that unflashy dividend-growers such as PRU are sinking.
Very fair point if it goes lower. I was more trying to convey the difficulty of reacting in the middle of an event. To your comment about PRU, don't know about it as a stock (I know the company obv) but this event is useful test for all sorts of ideas and strategies.
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