Stocks “should” be lower today. Equities just had one of the worst 1st quarters of the century, we’re in a war with no real end in sight, gas prices are up 40% in just over a month.
Fear is at “extreme” levels but to market veterans the real problem is investors aren’t afraid enough. Microsoft being down 23% YTD only seems frightening to newbies. We old timers have seen so much worse.
How much worse? How about the fall of 2008? In 63 trading days the S&P 500 moved >3% 29 times. October alone saw two of the worst weeks in market history (down >17%) AND a one day 11.6% rally. Every day brought a new, baffling announcement from Washington DC announcing some program intended to solve problems largely created by the government itself.
I was on CNBC’s Fast Money every night, at the time. As the “Official post-Game Show” for stocks, our job was to explain the ongoing catastrophe. In my book with Josh Brown I compared the experience to telling America its dog had been hit by a car every day.
Markets are much calmer now. Even last year’s Tariff Sell-Off was more subdued than the relentless selling we’ve seen for the last month. But the periods are more alike than different. The news is relentlessly bad. There is a constant offer for once-popular megacaps. Big money is bailing.
The Secret: Buying the Pain
In 2008 I told America my favorite 2 positions were “Cash and Fetal”; a phrase I borrowed from myself when I told Portfolio members I was building cash in February. By 2009 I was buying Apple “with both fists”. I didn’t nail the exact bottom but I didn’t have to. Investors who stepped aside for the when the disaster started and bought before the resolution was clear had plenty of cushion.
Amazon and Apple both fell over 50% on the assumption that the Great Financial Crisis would lead to a permanent collapse in consumer spending. Only in retrospect that does the idea seem laughable.
This is a much more acute, and so far more muted, sell-off but the lesson is the same. Stocks will bottom before bad news peaks. That’s how it happened not just just in 2008 but 2018, 2020 and even the post dot-com nightmare, when the NASDAQ took more than a decade to recover.
Time to Buy, Carefully
I’m putting money to work now. Slowly, carefully, selectively. We haven’t seen anywhere near the carnage of 2008 but there’s been more than enough pain in New Era Consumer Blue Chips to start adding. Even in a worst-case, lingering nightmare war scenario where gas prices keep elevating and profits are crimped, there will be stocks that outperform cash. Anything better than Worst Case will trigger a rush into most sold-off stocks. That’s where I’m focusing my energy, and Porfolio investments, now.
If you haven’t signed up already the time to do so is now, before we’re chasing these names higher.
