Just when you feel invincible, everything will start collapsing.
- This is the case with the longest bull market in American history. Everyone at beginning of February was shrugging off all kinds of risks: Trade tension? Iran? North Korea? Leverage? Coronavirus? – “Not a Problem!”
- Then coming first trading week of March, everything collapses on whoever was most complacent.
- Then the relentless selling began. This is such a text book “Mr Market” at play: he is bipolar. Sometimes he loves to you end of the world sometimes he is extremely depressed. And the mode change from cheerfully blissful to hyper-depressing may take a matter of days, if not hours.
- S&P 500 lost about 34% since its peak on Feb 19, 2020. Really who is counting? S&P 500 can be up or down 5% any day and as I am writing this article, the future suggests a opening up of more than 5%, and I am not surprised at middle of the day it hits circuit-breaker.
- At this moment, the most rational investors will prevail: they will NOT buy too early because of a 5-10% correction. they will NOT panic when it is 35% down from the peak.
- Remember: China is ahead of the curve every step of the way in this crisis. If you need a general playbook to model on, look at China and add 3 months to US because of democratic society’s push-pull in time of such crisis.
- Then all you need to do is to do your best not to get infected and come out of the other end alive and (hopefully) financially stronger (because of the calm purchase of stocks during the crisis).
God Bless America