Unpredictable, Uncontrollable, and Unexplainable


The stock market is unpredictable, uncontrollable, and unexplainable.  Many investors want to believe there is some crystal ball or magic wand that can give us a “heads up” when it comes to market declines.  The truth is that sometimes markets go down without warning and without great notice and more than expected.  But if you’re honest, the truth is that sometimes the markets go up without warning and without great notice and more than expected and THAT is what keeps us all coming back. 

My impression is that 3 major issues are weighing on the markets today, causing this to be a bad start to the week.  First, the continued spread of the Coronavirus and the constant news coverage about it.  There are a number of issues connected to this topic that would take several pages to explain.  Second, a less reported on rift between Saudi Arabia and Russia over the price of oil.   Oil prices have plunged, putting additional pressure on the markets.  This is a big, big deal and again would take several pages to fully detail.  Third, the overall issue of the Fed and interest rates.  The Fed is likely to lower rates again, putting additional pressure on Treasuries and causing everyone to wonder if we will eventually see negative interest rates.   The complexity and historical nature of the Fed’s current position is impossible to overstate.  These are 3 monumental pressures, all distinctly different, but all somewhat tied together.  

Today’s volatility seems to be based on the following unknowns, which I’ll put into 3 groups:

What we see on TV: 

1. How bad can the Coronavirus get?

2. How much will slowing consumer demand affect corporate profits?

3. Could the slowing economy push the U.S. into a recession?

4. How much can the Fed help (lower interest rates, purchasing assets)?

 Somewhat unknown to some investors:

A. How low can the price of oil go (fight for control between OPEC and Russia)?

B. How volatile and ugly can the Presidential Election get?

C. Record low Treasury yields (can they go negative)?

 The next possible issue:

X.   Natural Disaster?

Y.   Foreign Leader acting badly?

Z.   Washington D.C. circus?

 All of these, or none of these, could have a major impact on the markets.  I still think the best general advice would be to decide on a PRIMARY investment objective for our accounts.

1. Get into the market and stay in, don’t react to the volatility.

2. Hire a tactical money manager to attempt to make changes in your account.

3. Stay out of the stock market or have some type of product with some protections.

Buying when it feels good and selling when it feels bad rarely works.   Keep the faith.  Stick with the plan that was created specifically for your goals.  

We are willing to talk if you need us.