How to invest in the “future you”

By David B. Armstrong, CFA | Apr 01, 2020 | Weekly Market Commentary

First—If you missed my first Skype TV interview in history, be sure to see my hit on Spicer & Co.

Q1

The first quarter of 2020 was the worst first quarter in Dow history.  That’s 125 years.  There was only one stock in the Dow that finished positive…Microsoft. Up 0.01%, just a shade higher than John “Bluto” Blutarsky’s GPA in Animal House.

The S&P 500 was down 14% in March.

Going back to the Great Depression, only October 2008, August 1998, and October 1987 were worse than March 2020.

But a full year after each of those three months…the S&P 500 was up 7%, 38% and 11%, respectively.

But, that by itself doesn’t mean anything.

Historically, it’s not uncommon to see a reversal back down.  In fact, ‘01/’02 saw three +20% rallies before heading down to a 51% loss from the all-time high. And ‘80/’09 saw a 27% rally before settling into a 56% loss from the all-time high.

I can hear it now, “Dave, WTF! You are saying out of one side of your mouth that markets rebound after sell-offs and then out of the other side you are saying that the market may go back down again even after this little rally.”

Yes.

Both. Either. Or.

No one knows. Everyone thinks they have an idea and there’s no shortage of predictions.  Everyone is looking for the bottom, the “all-clear” sign that they can relax and possibly even get back into the market.

People trying that will likely fall into one of two camps–One camp will likely invest and instantly regret how much they invested because the market goes down.  The other camp will likely invest and instantly regret not putting more to work because the market went up.

I’ll make up a term for it: Guesser’s Remorse.

Here’s a better idea–Stop guessing.

Stop trying to guess the bottom and instead assess the OPPORTUNITY. Good companies struggling through an event are trading at 20-30% discounts from Feb.  Same with broad-based ETFs for those inclined to index, who want to avoid picking individual securities or who are invested in the government’s Thrift Savings Plan.

Why am I so confident in that advice?  See below. Markets recover over time and they still look oversold to me. (@ycharts & @bespokeinvest)

There is a lot of criticism getting thrown at folks (like me) who are giving some version of the “do nothing” advice.  And while I’m guilty of giving a version of the “Do nothing” advice, mine is more along the lines of “Don’t do anything stupid.”

I think there is a big difference between the two, and for people who don’t need to raise capital now, trying to adjust long-term portfolios now based on gut feeling, pundits on TV, or a desire to shift now to a portfolio they wish they had 3 months ago violates my advice.

That may not resonate with everyone, but I don’t care. I’m not trying to resonate with everyone. I’m just trying to resonate with someone.  If that’s you and you need help, reach out.

Assess this as an opportunity to invest in the “future you” who needs this money ten years from now.

Keep looking forward,

Dave

 

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