The risk-on trade continued today as the two leading sectors were the Financials ($XLF) and the Materials ($XLB). Both ETFs closed at the best level in several weeks as the fears of a European collapse and a global recession were subdued.
What I find interesting is that nothing and I repeat NOTHING has changed in the last six days when the markets were all hitting new 52-week lows and the world felt as if it was going to end.
That same day (last Tuesday) the US market moved into “bear market” territory with a drop of 20% from its high. Ironically as the headlines pointed out the bear market the $SPY rallied 11% from the intraday low to today’s close.
The point I am trying to make is that one day the situation is dire, the next day the economy will get through this and is improving. Nobody knows what the future holds from day-to-day, but what we can do is use what information we know (not what we want to know) and base our investment decisions on it.
As of today I continue to feel the economy will avoid a recession while it grows at a slow pace for a year or two. This will be good enough for many companies to continue reporting strong earnings and with a recession priced into stocks, now is still the time to have exposure to the market in your portfolio.
I had several clients that wanted to exit the market completely last week and some did. My company is here to guide clients to meet their long-term investment goals with appropriate risk and more importantly help individual investors from hurting themselves. Not that we are always correct in our calls, because we are not, but we do our best to remove emotions from the equation.
By selling everything and giving up on the market yesterday an investor let his emotions get the best of him. And the likely outcome will result in entering the market at a much higher price. This is just one more reason the individual investor struggles to beat the market.
No comments:
Post a Comment