THE MARKET MONTH THAT WAS By Carol Buss

May, 2020

Investors are still scared and waiting for another downdraft in the averages, a re-test of the lows to buy. The problem is you can’t fight the tape. You can’t wish something so. Professional investors have been cautioning anyone that will listen that now’s not the time to buy, while often buying themselves.

The panic in the markets have ebbed, and there is a more optimistic tone for the economy and the earnings of publicly-traded companies. We are now in a second phase, which is dependent on the state of the economy and business. This upside is dependent on fundamentals. We are not trading on the spread of the coronavirus but the positive economic impact of businesses opening up.

I don’t think we will re-test the lows because the conditions are not the same. We have more knowledge about the spread of the virus, how many people have already being infected, the death rate. We are continuing to learn how to better treat covid patients, and are developing drugs to lessen the morbidity of the disease. All of this has lessened the panic of March. While we will most likely not shoot up, I think the markets will move in fits and starts, with a lot of choppiness, depending on the headlines, but in the end, will gradually lurch upward.

THE MARKET MONTH THAT WAS By Carol Buss

March,  2020

March was marked by stay-at-home orders and the closing of restaurants and shops as non-essential businesses. Life in America was turned on its head, with masks, social distancing, isolation, and sanitation ruling the day.

The market fallout on March 12th, 18th, and the 23rd was total utter terror and panic about the spread of the coronavirus. Models were indicating millions in the US might die, and the uncertainty was palpable. It was all about the spread of the virus. Thus, the rebound that occurred was due mostly to more information about potential treatments the virus, the flattening of the curve, and the re-opening of the economy.

Most investors had not seen such violent moves in the market in their lifetimes, and for good reason. It was the 2nd fastest drop from a recent high of the Dow Jones Industrial Average into a bear market (19 days). (The worst was in November 9, 1931 to November 27, 1931, 15 days.) For the S&P 500, which fell 29.2% from the previous record high on February 19th, it was the fastest drop in history. On March 18th, the CBOE volatility index (VIX), considered a gauge of the level of fear in the market, spiked to a high of 84.72, worse that during the financial crisis in October, 2008.

A few days later, on March 23rd, the Dow closed at 18591.93, the S&P closed at 2237 and the Nasdaq fell to 6860.67, hopefully forming a “double bottom”, a bullish technical signal that often indicates that a sustainable bottom has been put in. The percentage of NYSE stocks closing above their 200-day moving averages was below 5%, and just above the all-time low, again during the financial crisis.

2000 point up and down days were not uncommon and upset the stomachs of the most seasoned investors. Buying stocks, even at low prices, did not seem the right thing to do, and admonitions about not “catching the falling knife” were rampant. What you pay for a share of a company’s earnings is important to the long-term health of your portfolios, and during these down drafts, you pay much less. The problem is that buying shares when you are not sure it won’t be much cheaper tomorrow, does not feel right.

Warren Buffett’s advice of buying when others are fearful is sound, but it is a lot easier to see it in print, than actually parting with your money to buy stock of quality companies when they are being thrown out with the broad market. However, history indicates otherwise. I think that the bottom is in and while it feels scary, and it is possible the stock might still drop below your purchase price, generally, the best time to buy stocks is when market sentiment is at its worst and no one wants to buy.

THE MARKET MONTH THAT WAS By Carol Buss

THE MARKET MONTH THAT WAS By Carol Buss

The stock market in January, 2020 was a tale of two halves, both dominated by global headlines. In the first half, optimism mostly reigned because of the China trade deal, culminating in the signing of the Phase 1 agreement on January 15th. The only thing marring positive sentiment were the airstrikes in Iran that killed Iran’s Soleimani and Iran’s missile attack on U.S. airbases in Iraq, but both did not have a lasting effect on the market. 

THE MARKET MONTH THAT WAS By Carol Buss

What a difference a year makes! Last December investors were wringing their hands over a potential recession. As a result, December 2018 was the worst December since 1931. That is quite a record, and one which did not feel very good. The market saw the sharpest losses on a Christmas Eve in history, and many turned off their computers and TV’s at the day’s early close in disgust, ready to celebrate Christmas with their friends and families, despite the market losses. This year we had a lot to celebrate on New Year’s Eve: the Dow up 22.3%, the S&P up 28.9%, and the Nasdaq up 33.5%.

November 2019 lived up to its billing as one of the best months of the year, with the Dow up 3.72%, the S&P 500 up 3.4%, and the Nasdaq up 4.5% for the month. The momentum from October continued on the 1st day of November, with both the S&P 500 and the Nasdaq setting record highs on that day, in reaction to a better-than expected employment report. On the 15th, the Dow cleared 28,000 points for the first time ever. This outperformance is not unusual, as the days before the Thanksgiving holiday are usually positive and November to January is usually a good period for the stock market..

October 2019 did not live up to its spooky billing, and the S&P 500 was up 2.04% for the month. October has a bad rap because there have been some very steep drops in the stock market in the month, most notably, in 1929, 1974, 1987, and 2008. In addition, major changes in the trend of the market have occurred in October. Despite its negative image, the average return for October during the last 50 years has been a positive .647, and there have been more up years than down years (43-27).

Following a negative return for the major indices in August, in September, 2019, the S&P 500 beat the averages of the past 70 years, which was -.59%. This time the Dow was up 1.95%, the S&P 500 was up 1.72% and the Nasdaq was up .46%. However, it was a tale of two halves, and just like many football games, each half can be a very different game. The first half ending on Friday 9/13, was positive, mostly due to an improved outlook for the China trade talks, and the second half was negative, again due to some setbacks in the talks, the Saudi oil fields attack, and the impeachment inquiry of Trump announced the afternoon of September 25th, which all produce more uncertainty.

You hear such generalities when listening to the news these days, and so much is glossed over to fit the perspective or agenda of the commentator, that I thought I would present a more detailed report about the past month.

Financial news is in a woeful state these days: generalities abound, sensationalism reigns, and too many are eager to advance their agendas than accurately describe the state of the market. Every day there is a new story line and a fresh angle, while a wealth of important details is regrettably glossed over. This report represents my attempt to be specific -- hopefully you will not mind weeding through the facts and figures and will find it informative and useful.