The Market is Down. Yay!
By Greg Fields
Buy high and sell low…said no one ever. But when markets become volatile; when stock values sink significantly, people behave contrary to their own interests by doing just that. Black Friday 2018 was a monster consumer spend-fest, generating nearly $8 billion in revenues. Why? Because shiny new things were on sale. Car companies spend $35 billion annually (nearly 10% of their revenue) to promote sales events. That colossal amount of ad spend is only justified when you bring lots of boys and girls to the yard. Americans love a good discount. If you offer it, they will come.
Except when it comes to the stock market.
For some reason, when volatility is up and stocks are taking it on the chin like an MMA fighter, many retail investors either stay away or panic and sell. The thinking becomes: my portfolio is never coming up again and the world is ending because in-bound North Korean missiles will soon obliterate Los Angeles. That trickle of fear can become a tide in spite of evidence to the contrary. 2008’s market was certainly overvalued thanks to bad debt and a negligent lack of oversight. But if you sold during that panic, you missed out on over 300%(!) in valuation gains over the following ten years.
Stocks are currently on sale. We should give a big whoop-whoop and deploy our cash into under-valued equities…or should we? Winning in a VIX-churning market like this one gets complicated. We had a significant correction in December 2018, but there is widespread disagreement as to whether or not we are officially in a bear market. Micro-economic metrics currently look solid, but geo-political instability seems to be fanning wild swings and market sell offs. While corporate earnings are up, there are definitely global clouds of slowing growth on the horizon.
Basically, opportunities are there, but this is not a market environment for the inexperienced or faint of heart.
It should be no surprise to anyone that in this potentially profitable, but unpredictable climate, one would be wise to seek out professional investment advice. And I don’t mean holing up in front of the tube to watch a couple episodes of Mad Money. Sure, stocks prices are lower than they’ve been in a while. Is Amazon worth 20% less today than it was two months ago? The answer is, probably not. But what are your goals and time frame? Do they justify taking on more risk to take advantage of current pricing? Will increased volatility in your portfolio rob you of a restful night’s sleep? These are all questions for a professional financial advisor who knows (or should know) your personal financial situation in depth.
Bottom line: many believe stocks are currently on sale. Now’s not a time to panic and cash out, but trimming and rebalancing to ensure current market conditions don’t compromise your longer-term goals is strongly suggested. Instead of dumping your stocks, you’d be smart to solicit a professional who will thoughtfully rebalance your holdings. So, should you buy this stock sale-a-palooza? If you take a longer-term view, the answer is almost always “yes”. But consider your situation carefully, talk to a pro and buy low.
Greg Fields is a Financial Advisor of Santa Monica, Calif-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately $800 million in assets under management as of 7/04/18. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn’t buy any investment without doing their own research to determine if the investments are suitable to their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results.”