Everyone feels some fear, watching the markets tumble so quickly. All of this has been contained in 3 days, hardly enough time to avoid it. So many of you have contacted me with questions, wondering what we might do. Some of you are interested in knowing how to capitalize on the drop and some of you just want to know if there is any way to take cover.
Obviously no one knows how deep and how long this drop will go, but there are a few points that I want to make that might help provide some perspective.
Every bull market eventually comes to an end and it is usually ugly when it happens. So is this the end of the bull market – the beginning of a 2008 style crash? Clearly no one can answer anything with certainty. HOWEVER, it needs to be noted that historically, EVERY major bull market top (except 1992 and 1998 which were barely classified as bull market tops) has “retraced” before the bear market began in earnest.
In simple English, this means that the current drop is likely to retrace back up to its earlier highs before we would see a 2008 style bear market. The stock market deals in probabilities, not certainties. If history and probabilities hold, we will have another chance to reposition ourselves more conservatively. We do know that this bull market is very old by historical standards, so I don’t think this drop is pure happenstance. I’ve been noting the increasing selectivity.
No one could foresee the last 3 days. HOWEVER, I will be trying to anticipate and evaluate the aftermath and act proactively. Fortunately there is some historical precedent and I will be watching for that. Bull markets don’t generally switch from bull to bear the way you would switch on a light. Of course that doesn’t make the process particularly easy to navigate.
Unfortunately, our “hedging” funds 361 Capital and Catalyst Managed Futures (AMFQX and HFXAX) have been dragged down with stock market. They are minimally correlated over longer periods (which is why I use them) but during these 3 days they have coincidentally been down also. However they remain up approximately 7% YTD nonetheless. I am still looking at them to help our cause.
If you would like to review your account, I will be available all week. Do not hesitate to email or call.