“Off The Wall” Blog
Unique, straight-forward, unfiltered opinion on topics of concern for individuals with newfound wealth.
Black Friday Investment Deals
By David B. Armstrong, CFA | Nov 26, 2018 | Weekly Market Commentary
Black Friday is known for great deals. Down 10%, the best deal out there right now may be equities.
People might be too scared to buy while they try to figure out why the market has gone down. Meanwhile, for every share sold, someone is buying…even on huge down days. So, there are some bargain shoppers out there hitting the “Black Friday investment deals.”
As for why the market’s down, look no further than the main stream press–it’s filled with reasons.
To name a few, we have rising interest rates, overvalued tech stocks that are finally selling off, a trade war with China, hatred for Trump, Dems taking control of the House and the gridlock that will seemingly ensue, corporate debt problems…the list could go on and on and on…
As a result, the S&P 500 has fallen roughly 10% since it hit an all-time high in September, which you can see in the chart below.
Down 10%…that’s a correction. They happen. In fact, twice a year, the markets remind us that this happens…twice a year. I’ve written about this before in our blog.
Going back to 1980, the average drop during a calendar year is 13.8%. Each red dot [in the chart below] shows you the maximum loss from the peak of that calendar year. The dark bars show the actual return for that year…see how 29 of the 38 years ended positive? (The data is as of the end of the 3rd quarter.)
We may end up with a 10th negative year on this chart, but the most important part is the red dots.
One thing that you must remember is that there will be a firehose of commentary that will attempt to explain and justify this recent correction. Be prepared for it to sound a lot like, “I saw this coming!”
Also, be sure to check yourself. Make sure you are not looking backward explaining, justifying and rationalizing this correction.
The tendency to interpret new information as confirmation of your own existing belief is called “confirmation bias”, which I addressed back in March.
For example, if you are fearful of the market going down, you will find, focus and fixate on information that confirms your belief. You will go out and find the noise that confirms your belief…and the news is filled with noise.
I believe in one thing: As long as the U.S. is growing its economy over the long-term, the market will continue to outperform over the long-term.
Need proof? Here’s the Dow going back as far as StockCharts.com will go…around 1980, which is close to four decades. Think of every bit of news that took place during that time – wars, market crashes, recessions, political party changes, bear markets, corrections (remember, just about two per year!), a terrorist attack on the U.S. and so much more.
The chart below is not noise. It’s fact.
All explanations and justifications from the past are irrelevant. They’re all noise and are usually wrong over the long-term.
These short-term corrections are the same thing as saying, “Shit happens”. No one can predict the short-term, they can only guess.
Investors need to have the ability to deal with ambiguity and uncertainty, and the tools for that are patience and discipline. If you do not have those two tools, your thoughts and emotions will become so impaired that you will lose grip on reality and become paralyzed by fear.
Fear like that will keep you out of the market and massively impact your ability to generate wealth over the long-term. Having a plan will keep that from happening to you – and a plan MUST include any need for cash over the next 12-18 months. With that you, a savvy investor with a solid plan, can look past noise, corrections and fear.
Could the economy be slowing? Sure. Could we see earnings slow down? Sure. Could we see gridlock in government? Sure. Could oil be signaling a global slow down? Sure.
The reality is that OVER THE SHORT TERM, I HAVE NO IDEA WHAT WILL HAPPEN AND NEITHER DOES ANYONE ELSE. Many people believe that somehow, someway people can predict corrections.
Said differently, they think it’s possible to predict when shit will happen.
There is a term for that too – it’s called “the fallacy of control.”
Shit happens…corrections happen. This is all part of a normal market. People experience the fallacy of control when they incorrectly believe that there is a way to proactively manage a situation influenced by millions and millions of uncontrollable variables.
The media feeds this fallacy of control. Beware of it.
Markets do not advance on a 45-degree line up and to the right. Part of being an investor in a normal market is possessing the necessary tools to be successful over time.
Being a savvy investor with a solid plan is not hard. Maintaining patience and discipline is the hard part. I realize that reading the same advice over and over again is also hard, but here’s one thing I know, and my conviction is real on this: I’m right.
I’m right, so I keep evangelizing my beliefs. Control what you can control – your emotions, patience, discipline and the accuracy of your plan.
If you have a long-term plan, are sitting on cash and have no plans for it over the next 12-18 months, you may consider doing some Black Friday and Cyber Monday shopping in the equity market.
Regardless, keep looking forward.
Important Disclosure Information
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Wealth Management), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.
All indexes referenced are unmanaged and cannot be invested into directly. The economic forecasts set forth may not develop as predicted. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument Wealth Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Monument Wealth Management is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.
A copy of Monument Wealth Management’s current written disclosure statement discussing our advisory services and fees is available for review upon request.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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