Selling stocks in panic is the worst thing you could do after a stock market crash. Successful investing is about buying low and selling high. When you sell after a crash, you do just the opposite.
And if you think you can just cash out for now and then get back in when the market improves, consider this: You have no way of knowing when the market will swing back. And there is a big cost to missing just a few really good days in the stock market.
For long-term investors, the best thing to do when the stock market crashes is nothing.
Take a breath, turn off the news and—whatever you do—don’t log in to view your account balances.
You may think that recessions and bear markets go hand-in-hand. But they don't. In fact, "normal" recessions don't lead to bear markets.
In the early 1980s, a U.S. economic recession led to just a 15% drawdown in stocks. The early 1990s recession similarly led to just an 18% drawdown in stocks.
Sure, the early 2000s recessions resulted in a 40% stock market collapse, while the 2008 recession sunk stocks by 50%.
But this is not that.
In 2000, we suffered from gross overvaluation. The S&P 500 was trading at 26X forward earnings, with a 10-Year Treasury yield above 5%. Today, the market is trading at 19X forward earnings, with a 10-Year Treasury yield below 2%. Today's market valuation is significantly lower both in absolute and relative terms compared to what we saw in 2000.
Meanwhile, in 2008, the entire U.S. financial system was on the verge of collapse. We don't have that today. Balance sheets across banks, corporations, and households are cash-heavy and very strong. Interest rates are very low. We do not have another 2008 on the horizon.
So, in the grand scheme of things, if we do head into a recession in 2022/23, it will likely be a run-of-the-mill recession -- like the early 1980s and early 1990s -- in which stocks dropped less than 20%.
Adapted from:
Corrections till now:
Dow Jones 12.6%
S &P 500 14.6%
Nasdaq Composite 21.9%
We should be seeing further downside...
DBS is advising investors to rotate back to pandemic-proof assets, particularly technology stocks and gold. The switch to a recovery play in anticipation of vaccine discoveries, it says, is showing signs of “fatigue”.
According to DBS, the technology-heavy Nasdaq Composite Index over US small caps had peaked on Aug 26 last year. The index had subsequently undergone a sharp relative underperformance as global portfolio allocators jumped onto the bandwagon of piling into domestic plays in anticipation of vaccine discovery.Let’s take a look back at the 2008 Global Financial Crisis bear market for a good example.
When the bull market started in March 2009, the S&P 500 rallied +63% from the bottom through the end of the year – very close to the +68% rally following the Covid-19 bear. In 2010, which was the second year of that bull market, the S&P 500 endured an intra-year correction of -16%.
The correction was scary at the time, but also healthy – the market finished up +13% in 2010. We have seen this very regularly throughout history, where the second year of a bull market is choppy but also finishes positive. I could see a similar outcome in 2021.
So, how should investors prepare for market volatility or a double-digit correction? Using history as a guide, it is time to mentally prepare for a correction now, so when it arrives, you expect it and can avoid making any knee-jerk, reactive decisions.
Adapted from Zacks "Mitch on The Markets" on 8 May 2021
The clean energy sector has been a noisy group to watch this year. Many of the stocks posted 50%, 70%, even 100% gains during the month of January.
But that was all dashed when the clean energy trade got crowded and hit its highs in February.
Crowded trades tend to see exaggerated moves to the downside as “the crowd” starts to exit, which results in a snowball effect of selling. That’s exactly what has taken this group of stocks down by 35-50% over the last two months.
Now, I’ve been watching the technicals on this group extremely closely. And I believe that this pullback will result in one of the strongest “buy-the-dip” opportunities that we may see in the next year, or maybe even two.
And if the technicals are right, we may be at the turning point for this “new technology” sector.
That’s why this week’s watchlist focuses on the two ETFs that represent the clean energy sector, along with a select few stocks that I’m eyeing from the industry.
Each are poised to start doubling or tripling some timely investments over the next few months – so, let’s get to it.
Adapted from Chris Johnson 25 Apr 2021
Mark his words....
#ICLN TAN FSLR FCEL ENPH SPWR
