If you’re watching the stock market everyday like Brad and me, you should first have your head examined, and if you weren’t lucky enough to catch the back and forth market action, let me give you the play-by-play.
Monday – Coming off last week’s “snapback” rally, we continued to move higher on reports of the “trade truce” agreed to by President Trump and President Xi Jinping of China. The second of the two major problems hanging over the market was moving in the right direction. President Trump backed off the most stringent of tariff increases and agreed to accelerate talks for the next 90 days in the hopes of getting a deal done. Perhaps there would be a Santa Claus rally this year, and with any luck, new all time highs might be around the corner. The Dow Jones opened up 450 points higher, but closed the day up around 300 points. The rally didn’t hold, but still a good day up over 1%…
Tuesday – The optimism quickly turned to outright hatred as the market had yet to hear China’s side of the negotiations. They had not yet arrived back from the G-20 summit to speak to Chinese media, and regardless of where you fall on the political spectrum, sometimes President Trump says things that aren’t entirely accurate. The reality set in that a 90-day ceasefire is not even close to being enough to change the long-term behavior of CEOs looking to make capital allocations or wealth managers looking to change asset allocations. Perhaps this was simply a stall tactic from the political administration?!? The Dow Jones ended up dropping almost 3%, its worst day since October 10th. But we were up almost 1700 points last week, we only gave back about half…
Wednesday – Markets were closed Wednesday, but with the algorithms detecting the negative sentiment in Tuesday’s market (possibly from the lack of trading that day, and not being programmed to recognize an unscheduled off day in the markets), on Wednesday night, the futures market reopened, and the S&P 500 fell 65 S&P points in 10 minutes (equivalent to approximately 600 Dow Jones points). Oh boy, Thursday is gonna be a doozie.
Thursday – While the computers managed to rallied the S&P back to only down 25 before the market opened, the sour mood continued and the Dow Jones fell another 800 points, intraday, before magically changing course mid-morning to close down only 79 points on the day. Phew…could an intermediate bottom be in? The television was asking people if this was an “all clear”.
Friday – The rally from Thursday continued at the open with Dow Jones climbing 100 points, only to again reach a technical level and start giving back some of its gain. As the day continued, the markets continued to lose steam, only to close down another 558 points. This market is untradeable and uninvestable! I’m so glad the week is over.
If any of these events affect the viability of your current retirement/income/growth strategy, you’re doing it wrong. If you’ve been sitting on cash and have been hesitant in recent months (years?) about adding to a market that was too expensive, now is your chance (but what if it keeps going lower?). If you’re starting to think it’s a possibility you are NOT the next Warren Buffett, and would like another perspective, now is the time to start that search, not 10% lower on the stock market.
I’m always looking for simple ways to relate the stock market to everyday examples, but the best one I’ve read in a long time was last week. It was a blog post (The Reformed Broker) from Josh Brown at Ritholz Wealth Management, and the metaphor goes on to talk about how the economy is like someone walking their Jack Russell terrier. The dog walker is the economy, strolling along relatively consistently, stopping infrequently, with most passerbys paying little attention. What most people notice is the twitchy, spastic animal on the end of the leash (the stock market). The dog is distracted by everything, stopping to stiff every tree and flower in its path. Let’s keep our eyes toward the future and let that dictate our investment strategies, not the Jack Russell terrier nipping at our heels.
– Adam