Depends on how you look at it

February 16, 2018

The market is racing back to the highs following the early February 10% correction. I've seen a wide range of emotions from investors and advisors the past three weeks. Their current perspective of the market seems to be based on how far their "look-back" period goes. 

 

For those focused on the run-up since the election, the market drop was shocking. The market had gone parabolic in late 2017 and the first part of 2018. This sucked in a lot of money (all-time high inflows into stock funds). The 10%, 8 day correction was not what they expected.

The fast recovery will embolden people if the market keeps marching to all-time highs making them once again jump back in to "buy the dip" the next time it drops. For those that believe we are still in a prolonged bull market with little chance of a bear market on the horizon, this was simply a "return to the mean".

Note the "trend line" is actually an exponential trend line, something that should be a red flag as this is not normal and highlights the excesses that have been created with the Fed's unprecedented easy money policies. Stepping back even further we can really put the current market environment in perspective.

 The drop in the market did nothing to change the fact both the length and the magnitude of the current bull market should be a cause for concern. The rapid drop to start the month was a warning. If you are in portfolios that lost an uncomfortable amount of money over those 10 days, this rally is an opportunity to re-position into something that is designed to keep the overall risk of the portfolio in a more comfortable range.

 

Please reload

Featured Posts

Investment Grade Junk

September 11, 2019

1/10
Please reload

Recent Posts

November 25, 2019

November 13, 2019

November 6, 2019

October 10, 2019

Please reload

Connect
  • LinkedIn Social Icon
  • Twitter Social Icon
  • Facebook Social Icon
  • RSS Social Icon

Related Posts

Please reload

This site is for INFORMATIONAL PURPOSES ONLY.  The comments and posts published in the SEM Trader's Blog ARE NOT investment recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.  CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute

Investing in the stock or bond markets involves risk and may not be suitable for all investors. Before making any investment decisions you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists you could sustain a loss of some or all of your initial investment and therefore you should not invest money you cannot afford to lose. You should be aware of all the risks associated with your investments and seek advice from an independent financial advisor if you have any doubts. All investments involve risk including those managed by SEM Wealth Management.

Opinions expressed at www.stratequity.com, www.semwealth.com and semtradersblog.com or the previous Trader's Blog site are those of the individual authors and do not necessarily represent the opinion of SEM Wealth Management or its management. Any opinions, news, research, analysis, prices or other information contained on this website, by SEM, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. SEM will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

 

The use of this website constitutes acceptance of our user agreement. Past performance is NOT indicative of future results.

***Anywhere performance of SEM's Investment Models is used, please refer to our Performance Snapshot  which contains details of the performance calculations for each of our investment models.***

 

There is no representation made as to the future results of SEM’s programs or if they will be profitable.

For additional information on the author and SEM Wealth Management, please see our DISCLOSURE DOCUMENT (ADV Part 2).