Category Archives: Bear Market

Bonds Getting Clobbered

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“Bondholders are going to be in for some nasty surprises…because the losses are piling up.” CNBC’s Kelly Evans

A bond is a debt security, similar to an IOU. Borrowers issue bonds to raise money from investors willing to lend them money for a certain amount of time.

When you buy a bond, you are lending to the issuer, which may be a government, municipality, or corporation. In return, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal, also known as face value or par value of the bond, when it “matures,” or comes due after a set period of time.

Just as individuals get a mortgage to buy a house, or a car loan to buy a vehicle, or use credit cards, corporations use debt to build factories, buy inventory, and finance acquisitions. Governments use debt to build infrastructure and to pay obligations when tax revenues fluctuate. Loans help to keep the economy running efficiently.

Whenever the size of the loan is too large for a bank to handle, companies and governments go to the bond market to finance their debt. The purpose of the bond market is to enable large amounts of money to be borrowed.

Bonds can provide a means of preserving capital and earning a predictable return for investors. Bond investments provide steady streams of income from interest payments prior to maturity.

The bond market (also known as the debt market or credit market) is a financial market where players can buy and sell bonds in the secondary market or issue fresh debt in the primary market. Like the stock market, the bond secondary market is made up of investors trading with other investors. The original company that received the money and is responsible for paying back the money, is not involved in the day-to-day trading. The market value of bonds can fluctuate daily due to changes in inflation, interest rates, and fickleness of investors.

The United States accounts for around 39% of total bond market value. According to the Securities Industry and Financial Markets Association (SIFMA), the bond market (total debt outstanding) was worth $119 trillion globally in 2021, and $46 trillion in the United States (SIFMA). The worldwide bond market is almost three times larger than the global stock market.

“I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a 400 basball hitter. But now I would like to come back as the bond market. You can intimidate everybody.” James Carville

The bond market is more important to the health of the U.S. and global economies than the stock market. And, you prefer for the bond market is not in the news, to be boring and functioning smoothly. Disruption in the bond market is what can get the economy in trouble.

As with any investment, bonds have risks which include:

  • Interest rate risk. Interest rate changes can affect a bond’s value. If bonds are sold before maturity, the bond may be worth more or less than the face value. Rising interest rates will make newly issued bonds more appealing to investors because the newer bonds will have a higher rate of interest than older ones. To sell an older bond with a lower interest rate, you might have to sell it at a discount.
  • Inflation risk. Inflation is a general upward movement in prices. Inflation reduces purchasing power, which is a risk for investors receiving a fixed rate of interest.

In aggregate, bond values are down significantly over the past three months–one of the worst quarters the securities have experienced since the 1980s, explains CNBC’s Kelly Evans. According to Natalliance, “government bonds are on pace for their worst year since 1949.”

Famed former Legg-Mason investor Bill Miller warned several years ago that “when people realize they can actually lose money in bonds, they panic”. Going into the inflationary 1970s, he said, “investors had done so well in bonds for so long they viewed them as essentially riskless, until it was too late.”
Investors have been warned for years about a bond crash that never panned out until recently. The chorus of financial pundits have said that the Federal Reserve’s massive quantitative easing and the federal government’s fiscal response to the financial crisis would ultimately cause inflation and crater bonds, it turns out they were right.

As a result, investors are piling out of bonds, which have seen outflows for ten straight weeks. Municipal bonds have seen historic outflows and are about to post their worst quarter since 1994, down more than 5%, according to Bloomberg. Investors have also been fleeing high-yield debt, especially as the Fed has turned increasingly hawkish this month.

You won’t find many financial professionals, other than fixed-income specialists, recommending big exposure to bonds right now. The outlook is just too uncertain.

“Bonds have nowhere to go but down since [interest] rates have nowhere to go but up.” Liz Young, SoFi Chief Investment Officer

Bonds are not expected to rally or perform better if growth slows, unless there is a meaningful dent in the outlook for inflation, and it would take a very deep and lengthy downturn to do so, as economists and financial pundits have warned.

Bonds have sold off and they haven’t served as downside protection within an investor’s diversified portfolio of stocks and bonds. Year-to-date, bonds have returned -8.7% YTD on 7-10-year Treasury bonds compared to a -6.0% YTD return in the S&P 500.

When bonds are in the red and cash is losing value because of inflation, investors turn to the stock market, at least tactically.

In this environment, “real assets” like real estate and commodities have done extremely well tend to do well in a tough investment environment for the long run (gold, metals, energy — along with globally diversified real estate).

As for stocks, Bill Smead, of Smead Capital Management, likes energy and housing market plays; noted investor Bill Miller likes energy, financials, housing stocks, travel-related names, and even some Chinese stocks (he’s also still bullish on mega-cap tech like Amazon and Meta).

The S&P 500 overall has been impressively resilient thus far, hanging in there with drop of less than 5% since the start of January–less than bonds, in other words. As bond losses deepen, don’t be surprised to see the “TINA” (There Is No Alternative) dynamic continue to bolster stocks.

However, there are several good reasons for purchasing bonds and including them in your portfolio:

  • Bonds are a generally safe investment, which is one of their advantages. Bond prices do not move nearly as much as stock prices.
  • Bonds provide a consistent income stream by paying you a defined sum of interest twice a year.
  • Bonds provide diversification to your portfolio, which is perhaps the most important benefit of investing in them. Stocks have outperformed bonds throughout time, but having a mix of both can lower your financial risk.

References:

  1. https://www.investor.gov/introduction-investing/investing-basics/investment-products/bonds-or-fixed-income-products/bonds
  2. https://www.themoneyfarm.org/investment/bonds/why-is-there-a-market-for-bonds/
  3. https://www.sofi.com/blog/liz-looks-stocks-vs-bonds/
  4. https://www.cnbc.com/2022/03/28/kelly-evans-its-getting-ugly-out-there-for-bonds.html
  5. https://archerbaycapital.com/bond-market-more-important-to-economy/

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining market equity values.

Time in the Market

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Time in the market, not timing the market

Investors have a bad tendency to do the wrong thing at the wrong time with regards to investing decisions. They want to panic sell when the market is getting hit really bad (sell low) or they fear that they’re missing out on the market rally and buy when markets start to go up (buy high). Successful investors know that it is impossible to predict a stock’s outcome. Any stock can result in a potential profit or loss, but the hope of “hitting it big” in the markets has led plenty of investors to try and time the market. Instead, it’s importance of investors to have a clear idea of their goals, as well as the time frame for their financial plan.

 Focus on time in the market – not trying to time the market

Timing the market involves trying to predict the future price trend of a stock and the market. As a result, there is a high probability of failure with this strategy, because no consistently predict the future of the markets. Although it sounds ideal to buy stock at a low price and sell it shortly after at a higher price for a profit, it’s often too good to be true. There are always people who get lucky, but that’s exactly what it is: luck. Essentially, someone may have luck with one stock, but lose it all on the next trade.

“The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has done it successfully and consistently.” John Bogle

It can be tempting to try to sell out of stocks to avoid downturns, but it’s nearly impossible to time it right.  If you sell and are still on the sidelines during a recovery, it can be difficult to catch up. Missing even a few of the best days in the market can significantly undermine your performance.

The most important course of action for investors is patience and maintaining a long-term mindset. History has repeatedly demonstrated the value for investor to stay invested in the market, even during a market sell off. Going back to 1930, if you had stayed exposed to the equity market, your returns would have been around 15,000%.

If you missed the top 10 performing days of each decade since 1930 because of mistiming the market over that period, your returns would be a mere 91%. And missing even a few days as the market rebounds can significantly diminish your returns, research from JP Morgan shows.

Keep perspective: Downturns are normal and typically short

Market downturns may be unsettling, but history shows stocks have recovered and delivered long-term gains. Over the past 35 years, the stock market has fallen 14% on average from high to low each year, but still managed gains in 80% of calendar years, according to Fidelity.

Investors must ignore the urge to panic and sell off their investments. Perspective is what is important during days like these and long term perspective is key. No one can consistently time the market and one of the most important factors in building wealth is time in the market.

Essentially, you don’t want to sell off your stock positions when the market has a bad day. Instead, ride it out. Research indicates that over the long-term, you reap the rewards of the power of compounding by staying invested in the market.

Rather than give in to emotion, stay the course. The wealthy are in the market for the long term. The headlines are scary, but there’s always going to be a new threat to investors, whether it’s election fears or whatever the Fed will do next.

References:

  1. https://www.cnbc.com/2020/03/31/bofa-keith-banks-warns-investors-against-trying-to-time-the-market.html
  2. https://www.prnewswire.com/news-releases/the-importance-of-time-in-the-market-vs-timing-the-market-301113822.html
  3.  The hypothetical example assumes an investment that tracks the returns of the S&P 500® Index and includes dividend reinvestment but does not reflect the impact of taxes, which would lower these figures. There is volatility in the market, and a sale at any point in time could result in a gain or loss. Your own investing experience will differ, including the possibility of loss. You cannot invest directly in an index. The S&P 500® Index, a market capitalization–weighted index of common stocks, is a registered trademark of The McGraw-Hill Companies, Inc., and has been licensed for use by Fidelity Distributors Corporation.
  4. https://www.fidelity.com/viewpoints/investing-ideas/six-tips

5 Simple Rules for Investing Success

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“Definiteness of purpose or single-mindedness combined with PMA (positive mental attitude) is the starting point of all worthwhile achievement. It means that you should have one high, desirable, outstanding goal and keep it ever before you.” W. Clement Stone

Investing is a mental game.  And to be successful at the mental game, you must adjust your mindset and retrain your thinking that as a long-term investor, you need to be able to buy stocks and open new positions when the market is crashing or correcting.  You’re genetically programmed to be a lousy investor.  You must set up systems and rules to fight our normal urges and invest at what appears to be the absolute worst time and when everyone else is fearful and selling.

It is important to accept the fact that you will absolutely enter a position at the wrong time and make a bad buy in the short term.  It happens to every investor at sometime in their life.

Investing doesn’t have to be intimidating or challenging. To get started investing in stocks and bonds, you should follow with deliberate purpose and action five simple rules for building a long-term portfolio, according to TD Ameritrade:

  1. Contribute early and often – The single most important thing you can do in investing is to invest early and save often. Thanks to the magic of compounding, money invested early has more time to grow. Delaying investing can have a significant effect on your portfolio. In fact, for every 10 years you wait before starting to investing, you’ll need to save roughly three times as much every month in order to catch up.
  2. Minimize fees and taxes – Charges and taxes will have an impact on your overall returns, so it’s important to take these into consideration when choosing your investments.
  3. Diversify your portfolio – We all know the saying ‘don’t put all your eggs in one basket’, but it’s particularly important to apply this rule when investing. Spreading your money across a range of different types of assets and geographical areas means you won’t be depending too heavily on one kind of investment or region. That means if one of them performs badly, some of your other investments might make up for these losses, although there are no guarantees.
  4. Consider how much time you have – Investing should never be considered a ‘get rich quick’ scheme. You need to remain invested for at least ten years, but preferably much longer to give your investments the best chance of providing the returns you’re hoping for. Even then you must be comfortable accepting the risk that you could get less than you put in. If your investment goals are short-term, for example, two or three years away, investing won’t be right for you, as you’ll need to keep your money readily accessible, usually in a savings account.
  5. Have a financial plan and focus on long-term goals – A financial plan creates a roadmap for your money and helps you achieve your goals. It is a comprehensive picture of your current finances, your financial goals and any strategies you’ve set to achieve those goals. Good financial planning should include details about your cash flow, savings, debt, investments, insurance and any other elements of your financial life. Knowing what your financial goals are and what sort of timeframe you are investing over may help you stick to your plan and strategy. For example, if you have long-terms goals, perhaps saving for retirement which may be several decades away, you may be less tempted to dip into your investments before you stop work.

https://youtu.be/NxEcO7ITtMo

And, never forget the top two and oldest rules for investors, according to Warren Buffet:

  • Rule #1 of investing is “Don’t Lose Money.”
  • Rule #2 is “Don’t forget rule #1.”

What Buffett is referring to is a state of mind and philosophy for investing. Simply, it means that there’s no such thing as “play money.” You don’t go out and speculate on a stock. You remain patient and disciplined, whether your tax deferred or brokerage accounts are up or down for the month or year.

Investing is not gambling and the stock market is not a casino. There’s no such thing as the house’s money in investing. It’s all your money, and it has to be protected.

So, don’t become anchored to the price of stocks, instead focus on buying good businesses at fair prices.  Only thing that truly matters in investing is the long-term future prospects (innovation, moat, management acumen) and growth opportunities of businesses. Don’t let the loss in the price of a stock get in your head and don’t let a short-term paper loss sway your emotions, behaviors or actions.

Better to be a regular investor rather than be perfect or optimize to price of the stock.  And remember, celebrate good stock buys, and recognize and learn from bad buys.

References:

  1. https://www.barclays.co.uk/smart-investor/news-and-research/investing-for-beginners/10-golden-rules-for-investors
  2. https://www.fool.com/retirement/2007/08/06/invest-early-and-often.aspx
  3. https://www.investopedia.com/articles/financial-theory/11/6-lessons-top-6-investors.asp
  4. https://www.investopedia.com/articles/fundamental-analysis/09/market-investor-axioms.asp
  5. https://cabotwealth.com/daily/how-to-invest/10-basic-rules-of-investing-according-to-the-legends

Markets are Unpredictable: Pullbacks, Corrections and Bear Market Happen

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Pullbacks and corrections are commonplace, and investors always say “this one feels different” until it’s forgotten in the next pullback.  Since 1920, the S&P 500 has recorded a 5% pullback three times a year on average and a 10% correction once every year and a half, according to Fidelity Investments.

Corrections, as opposed to bear markets, often leave no lasting damage. According to
Schwab, since 1974, the S&P 500 has risen an average of 8% one month after a market correction and more than 24% one year after a correction. Investors see sell-offs as a way to rewind the valuation spring, while also shaking out coattail-riding stocks that
were not rising on merit.

According to Fidelity, from Jan. 1, 1980, through Aug. 31, 2020, if you missed only the best five days in the market your performance would be 38% lower for the time frame. It’s far better to focus on developing a strategy that you can stick with over the long run than trying to predict what the market will do on a day to day basis.

Many investors have the urge to tinker with their investments. This is especially true when the markets are volatile. Watching your holdings gyrate widely in value can make anyone uneasy. That helpless feeling causes many to want to trade more frequently or make portfolio tweaks or running to safety. However, sitting on your hands and not doing anything is usually the best approach.

During turbulent times, it’s crucial to avoid the big mistakes. Usually those missteps stem from succumbing to emotion (fear of loss) and doing too much, not doing too little.

Warren Buffett put it best when he said, “be fearful when others are greedy, and greedy when others are fearful.” As markets sell off or correct, it’s critical to focus on long-term time horizons. If you have available cash, it would be a great time to buy more stocks. Understandably, the act of investing more money after seeing your portfolio drop so dramatically is very difficult. The comments received by financial advisors included, “Why add money to something that keeps dropping in value?” and “Shouldn’t we cut our losses and move to cash?”

While every fiber of your being is telling you to run for the hills, reaffirming your strategy by adding money is generally the best decision when markets are in a selling frenzy or correction.

References:

  1. https://www.fidelity.com/viewpoints/investing-ideas/six-tips

Hurting long before Pandemic, failing companies took stimulus money then closed anyway

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Stein Mart Inc. was in desperate financial shape long before COVID-19 forced closures at its discount department stores. During the past several years, the retailer had hemorrhaged tens of millions of dollars. Like many struggling businesses, the company in June 2020 turned to the federal government’s Paycheck Protection Program, or PPP, as a possible savior. The $10-million loan didn’t last long.

Within two months, Stein Mart filed for Chapter 11 bankruptcy protection, citing more than $500 million in liabilities. The company closed all 280 stores and 9,000 workers lost their jobs. And, the company will never repay American taxpayers the $10-million.

Nothing prevented Stein Mart from taking the PPP handout on its way under.

Lenders participating in the Small Business Administration relief program shelled out more than $520 billion last year to millions of companies searching for a lifeline to stave off the economic impacts of COVID-19. Like Stein Mart, USA TODAY found that some were failing long before the pandemic hit.

Josh Salman from USA Today explains how failing companies were able to take stimulus money and close anyway. USA Today

To read more, go to: https://www.usatoday.com/story/news/investigations/2021/01/13/recipients-stimulus-funds-went-bankrupt-fired-workers-and-closed/3960382001/

Goldman Sachs’ Analysis Shows Economic Benefits of Wearing Masks

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“The fate of many lives, not to mention the U.S. and global economy, largely depends on the containment of the novel COVID-19 coronavirus.” Goldman Sachs

  • Cloth face coverings may help prevent people who have COVID-19 from spreading the virus to others.(2)
  • Cloth face coverings are most likely to reduce the spread of COVID-19 when they are widely used by people in public settings.(2)

According to a recent analysis by U.S. investment bank, Goldman Sachs, there’s one simple thing Americans can do that would boost U.S. GDP and make a huge difference to the economy, American jobs, and overall prosperity.

Illustration of people wearing cloth face masks

Goldman Sachs’ analysis, led by its chief economist Jan Hatzius, concluded that “a universal mask-wearing order can improve the U.S. GDP by a huge five percentage points”.  And according to Centers for Disease Control and Prevention (CDC), “cloth face coverings are recommended as a simple barrier to help prevent respiratory droplets from traveling into the air and onto other people when the person wearing the cloth face covering coughs, sneezes, talks, or raises their voice”.

Goldman agrees with the emerging scientific evidence that “face masks are associated with significantly better coronavirus outcomes.”  And, based on the growing evidence, the Centers for Disease Control and Prevention has expanded its mask guidance stating that Americans should wear them in all “public settings and when around people who don’t live in your household, especially when other social distancing measures are difficult to maintain”.

Goldman’s analysis concludes “a national face mask order could increase face mask-wearing by 15 percentage points, reducing the transmission growth rate of confirmed cases from 1.6% to 0.6%”. Goldman concludes that “increased face-masking would substitute for local lock downs and social distancing, which caused U.S. GDP to decline 17% between January and April”.

While anecdotal evidence does suggest strongly that universal mask-wearing can greatly benefit the economy and save lives, it has been difficult to convince Americans of this fact.  As a result of not mandating a national face mask-wearing, there has been a resurgence of COVID-19 inflections and hospitalizations in a number of southern and western states in the U.S.

From a medical expert perspective, “if everyone in the U.S. wore a mask, the coronavirus pandemic could be under control within four to eight weeks”, was conveyed by Centers for the Disease Control and Prevention director Robert Redfield in a discussion led by medical journal JAMA.

In summary, Goldman Sachs’ analysis suggests that the economic benefit from “adopting a national face mask mandate and increased face mask usage” could be sizable, especially when compared with the alternative of a return to broader societal lock downs and increasing COVID-19 infections.

Sources:

  1. https://www.nasdaq.com/articles/goldman-sachs-says-this-simple-measure-can-save-lives-and-the-economy-2020-07-14
  2. https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/diy-cloth-face-coverings.html
  3. https://www.goldmansachs.com/insights/pages/face-masks-and-gdp.html
  4. https://apple.news/ApjIDbf3mR_u11IZp8goONw

Asset Allocation Strategy

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Asset allocation is designed to help an investor take short-term fluctuations more in stride.

When you divide your money among a variety of asset classes — stocks, bonds, real estate and cash — you can potentially smooth the ups and downs of financial markets. Diversifying your investments within the major asset classes and investment styles can help balance out a portfolio.

Asset allocation enables you to own a wide selection of investment types to potentially benefit when one asset class does well and limit the downside when another asset class does not. Once you create an asset allocation strategy as part of your comprehensive financial plan, it helps to keep a long-term perspective when the inevitable financial market volatility occurs.

It’s important to note that asset allocation and diversification do not ensure a profit or protect against loss. However, it makes sense to remember your long-term financial plan and asset allocation strategy, and stick with it, no matter how great short-term economic challenges may seem.

A long-term commitment to your asset allocation strategy doesn’t mean you shouldn’t take action during periods of uncertainty. The key is taking the right action. You may discover the original percentages you allocated to different asset classes and types of investments are not in sync with your strategy due to shifts in the market.

Your portfolio may be overly concentrated or under-represented in one area. If so, you can reallocate your assets and ensure your long-term asset allocation strategy is back on track.

Of course during times of market volatility and economic uncertainty, many investors are tempted to move out of stock investments, into the safety of cash positions. Yes, cash is an asset for investors, but understand that you earn nothing with this asset class…no return from cash.

As a result, investors tend to stay on the sidelines until financial turbulence settles, but this may be a costly mistake. One thing previous recessions and bear markets have taught us is that life goes on. In each of the most recent five bear markets since 1987, sell-offs and correction were ultimately followed by economic and market recoveries.

Thus, once stock markets unexpectedly rebound, as they typically have done in the past, you may end up getting left behind during what could have been a good opportunity to benefit from market rapid recovery and gains.

We live in a world fraught with headline risk and conflict, something that will be ever-present. This fact will always be an integral part of the investment landscape. Those who exit or try to “time the market” tend to miss a significant rally. Those who remained invested or rebalanced towards equities tended to boost their returns during a market rally.

The length of time an investor is in the market can make a difference in the amount they will save and invest to potentially grow their investments. If you sell assets while the market is declining, you risk missing upward trends that have historically followed. If you want to retire someday, start saving and investing now. It takes decades of long-term financial planning, saving and investing to get there. 

Always remember…

Learning to manage money. You need to learn and understand core principles of financial planning — long-term investing, risk management, diversification, asset allocation, retirement, estate and tax planning.

Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.

All investments involve risk including loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

References:

  1. https://im.bnymellon.com/us/en/individual/articles/letter-from-the-lion/spring-2020/stick-with-a-plan-in-uncertain-financial-markets.jsp

Don’t Panic

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Here’s the most important piece of advice for long-term investors: Don’t panic.

Both the current pandemic driven economic environment and equity market environment are incredibly uncertain. Likewise, the future is equally uncertain and unpredictable.

Unprecedented unemployment, declining oil prices, liquidity concerns in financial markets, and expanding federal debt represent a clear and present risk to future U.S. economic prosperity.

Moreover, the current uncertainty has had a negative impact on global economies and equity markets. The impact has created fear and caused investors to panic sell their positions and seek safe havens by moving into less riskier assets.

Yet, it is important to understand that market corrections happen on a regular basis. A stock market correction is a sudden drop in the value of stocks, usually by more than 10% from their most recent high.

Bottomline, it’s going to be okay. This too shall pass. Investors are advised to ‘stay the course’, follow your financial plan and focus on your long-term goals.

3 tips to avoid locking in losses | Mass Mutual

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By Allen Wastler
Allen Wastler is a former financial journalist with over 30-years of experience, including time at CNBC, CNN, and Knight-Ridder Newspapers.
Posted on Apr 13, 2020

After a huge market downturn and a major loss of value in your investment portfolio, the temptation to do something — anything — may be hard to resist.

But in many ways, the best action may be to take no action. Why? An investment plan is a long-term project and making changes to it based on short-term considerations is often ill-advised. That’s why financial professionals encourage people to stay calm during market sell-offs and think about long-term objectives.

“It is a tough and scary time, and not locking in losses by panic selling is critical,” said J. Todd Gentry, a financial professional with Synergy Wealth Solutions in Chesterfield, Missouri.

But even if you did resist the initial impulse to flee during a market retreat, you still need to keep some discipline about your portfolio as you wait for a market recovery. Here are some traps to avoid….Read more: Avoid Locking in Losses

Markets, as a whole, have historically bounced back from downturns with time, as the following chart illustrates.

Source: Bloomberg. The S&P 500 is an equity index that consists of the stocks of 500 large U.S. companies measured by market capitalization. The results here include the effect of reinvested dividends. You cannot invest directly in an index.

Economy and Markets will Recover

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“There are ‘tremendous opportunities’ in markets.”  Larry Fink

To build wealth, it is advised that investors should take a long-term view of markets; and that they should take a long-term view in the way they manage their personal finances and investment portfolios.  It is certain that the world will get through; and, the economy and markets will recover once the COVID-19 crisis has abated.

For investors who keep their focus on the long-term horizon, “there are tremendous opportunities to be had in today’s stock markets”, according to Blackrock’s Chairman and CEO Larry Fink. For many of Blackrock’s clients, “the recent sell-off created an attractive opportunity to rebalance into equities,” Fink said.

Take banks as an example, “the damage has already been done” to the industry according to most financial professionals and traders.  Yet, the banks are in better condition financially than they were during the 2007-2009 financial crisis.  Once the virus spread stalls and the economy returns to normal operation, the Fed will still be supporting the banking system.

Positive sign for comeback

“Don’t watch their lips, instead watch their feet.”

Extraordinary monetary stimulus measures by the Federal Reserve and fiscal stimulus measures by Congress and the White House have put a proverbial floor under the market in late March.  As a result, many C-suite executives are buying up their own company’s stocks at a record pace, according to InsiderSource.

“Insiders have a 35+ year track record of buying on the type of extreme weakness experienced in Q1′20,” InsiderScore director of research Ben Silverman said in a note. “A dramatic increase in insider buying volume combined with dampened levels of insider selling has resulted in the generation of industry buy inflections – our strongest, quantitative macro signal – for the entire market.”

In his 2010 newsletter to Berkshire-Hathaway shareholders, Warren Buffett wrote: “When it’s raining gold, reach for a bucket, not a thimble.”  Based on his vast and highly successful investing experience, he states that in period like the present, “Big opportunities come infrequently”.

  1. https://www.cnbc.com/2020/03/30/larry-fink-says-economy-will-recover-from-coronavirus.html?recirc=taboolainternal
  2. https://www.cnbc.com/2020/03/30/coronavirus-stock-market-jpmorgan-top-bank-stock-pick-for-trader.html?__twitter_impression=true&recirc=taboolainternal
  3. https://www.cnbc.com/2020/03/26/executives-are-buying-stock-in-droves-giving-a-strong-signal-that-the-comeback-is-for-real.html?recirc=taboolainternal
  4. https://www.cnbc.com/id/35616702