EDITOR'S NOTE
I actually thought the correction would come sooner than this, since the CNN "Fear & Greed" gauge has been warning "Extreme Greed" since the end of last year.
Instead, we got a melt-up. The manic action in stocks like Tesla and Virgin Galactic was indeed a warning that the market overall was getting overbought. I mean for heaven's sake I now follow "pricelesstay" on Instagram (the college girl-turned Tesla daytrader). There was a strange abundance of year-end stories about "here come the Roaring Twenties again." And perhaps the clearest sign of exuberance was the classic contraindicator: Davos. The Davos Plutocrats Warm Up to Trump, was the New York Times headline, saying "Tax cuts and a record stock market speak volumes."
Well, now it's a record for fastest 10% drop from the all-time highs ever.
I think that backdrop is super important for putting this nasty selloff in context. It was overdue. Now, it's arrived. So what's next? Could it get a lot worse before it gets better? Sure. But I think it's always useful to ask yourself: what happens after the bad thing happens? Don't get caught up being scared of a generalized "bad thing." Think it through: what if there's a recession? What if it's just 1% growth? When are you buying, and what?
Does it really make sense to buy Clorox at all-time-highs right now, for example? Everyone I know is stocking up on bleach wipes (which aren't actually how the company recommends killing germs) and such. Might help Clorox now, but my guess is after this no one will need to buy sanitizing supplies for awhile. For years, maybe.
I could be wrong, obviously, but my point is don't just follow the herd. And don't assume everything happening in the market is coronavirus-related, as opposed to a needed readjustment after a strong rally.
And finally, always keep in mind that events like this don't happen in a vacuum: it gets bad enough and authorities start handing out $1,000 cash to people (seriously, Hong Kong is doing it). It's not just "bad thing happens, end of story." What happens if we get a fiscal and/or monetary policy response? Etc.
What a wild week it's been. We'll have the very latest for you, as always, at 1 p.m.
See you then!
Kelly
P.S. Click here to subscribe to The Exchange podcast and never miss a show.
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Jumat, 28 Februari 2020
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