“Off The Wall” Blog
Unique, straight-forward, unfiltered opinion on topics of concern for individuals with newfound wealth.
Everyone wants to know if the last three days mean we have seen the market bottom. Who knows. If you had asked me what the market was going to do Tuesday, when there was no action on passing what is now known as the CARES Act, I’d have said, “It’s gonna tank.” Instead, it was the biggest up day in history. If you had asked me what the market was going to do today, and the unemployment numbers came in at at 3.3 million versus the estimated 1 million, I’d have said, “Its gonna tank.” Instead, as of this writing we are up around 4% on the Dow.
Look beyond the bottom. We may or may not have seen it. Today I’ve heard just as many people say, “We are on our way into what is going to be the fastest recovery in history!” as I’ve heard say, “We are going to see a 10-20% sell off from here soon.”
For those investors who are still fully invested, consider one of my recent statements from an earlier blog post—keep your portfolio positioned now for a recovery in the future. DO NOT try to create a portfolio now you wish you had when this started.
For those investors who have plenty of cash to cover spending needs for a while, hold what you got and don’t bet that cash on short-term trades. You are exercising your plan…have a cash bucket to lower the probability you need to sell securities during a sell-off/recession.
For those investors that are experiencing an unforeseen change in circumstance that necessitates generating some cash, you are not totally screwed. There are good strategies and bad strategies—seek help from Monument or your own advisor if you are not a client.
For those who are assessing whether or not now is the right time to increase your equity exposure by investing surplus cash not earmarked for upcoming expenses, I think it’s more constructive to focus on the CURRENT OPPORTUNITY rather than nailing THE BOTTOM. (Chart below is from around 2:30pm, 3/26/2020)
Today, the S&P 500 is down -22% off the high. I understand that the market has rebounded over the last three days but -22% still represents a pretty good opportunity to me.
TIP – Don’t get into the business of making prognostications about the next move up or down. No one can know for sure. Even when the odds are 90% assured, there is still that 10% chance lingering as a possible outcome.
Want an example?
Super Bowl LIV, February 2, 2020.
Well into the fourth quarter, the San Francisco 49’ers had a +90% chance of winning the game. Here’s a graphic that shows the game, score, some notable moments and the probability for winning with only 7:13 seconds remaining in the game. (Credit @LeeSharpeNFL)
While most people were probably licking the last bits of guacamole off their fingers and heading home from a party (pre-COVID-19), the Chiefs had a different perspective on the game…most people know what happened next.
The Chiefs, with only a 10% chance of winning, won.
Are there scenarios open to debate over what’s next for us now?
But, at the end of the day, no one really knows anything for sure.
Be in the business of assessing the value of investing at these levels for the benefit of the future you in 10-15 years.
The “future you” will probably be okay with you missing the exact bottom. Even if we do trend lower from here.
I’ll sign off with a Bloomberg Terminal screen shot by David Ingles (@davidinglesTV) and a Tweet from Monday that read:
“The Dow Jones just had its best day since 1933. Here’s how that looks on a chart that goes back to 1933. I put a green arrow so you guys don’t miss it.”
Remember – focus on the opportunity, not the bottom.
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.
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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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