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Strong stomachs and stock market dips

Injured FootDo you remember that day last month when the Dow Jones Industrial Average dropped 800 points?  Yeah, I know. Asking about stock market dips is kind of like if you remember that day when you fell out of the tree and broke your arm, isn’t it?

The morning following that precipitous drop (3.04%, by the way) I was in the car listening to the radio just before the market open. The DOW futures were down, and Stuart Varney (Varney & Co. on Fox Business radio) was talking to his guests regarding the market decline.

As an aside (you were afraid you wouldn’t get any side notes, right?) I really enjoy Stuart Varney’s radio show. He is polite, interesting, intelligent — and allows his guests to have their say. His conservative political views come through clearly, but he allows for opposite viewpoints without being disagreeable.  That’s becoming all too rare in our national discourse.

Unfortunately, his show is on at the same time as Full Ride is on ESPNU radio. That’s a college sports radio show starring Chris Childers and Rick Neuheisel, and it’s the only other radio talk show I really enjoy.  Wouldn’t you know they are broadcast at the same time? It’s a real dilemma, I tell you. But life is about choices, I guess. Didn’t we just talk about that last month?

 

But back to Stuart Varney: he was interviewing guests about their stock market concerns given the previous day’s sell-off, the negative futures (it turned out to be a positive day in the US markets) and the “negative yield curve.” One of the guests was very rosy and positive in her outlook and repeatedly said the drop was a “buying opportunity” and going forward — listeners should “buy on the dips.”  Stuart emphatically responded that she had a “strong stomach, indeed” to be a buyer in such a market.

Thinking with Coffee

Hmmm… I wasn’t so much struck by the guest’s advice (and I apologize to her for not remembering her name) as I was by Stuart’s response. The advice to “buy on dips” is generally an obvious suggestion: if you are going to buy most anything, wouldn’t you prefer to purchase at a discounted sale price? Duh.

The lady also was a supporter (she might even work for, I don’t remember) the current administration in Washington. Obviously, those folks are in favor of a continued robust economy and stock market for their own political gain — as well as for the good of the people of this country.

The suggestion that someone would have to have “a strong stomach” to be a buyer at this time took me aback. Now let me be clear before I go any further: Nothing I say here should be taken as investment advice for your action. I cannot possibly know or address the specific and differing investment needs and goals of all my reading audience at any point in time. Investment advice — like clothing purchased online — is not one size fits all!

If, however, you would need a strong stomach to purchase US large cap stocks after a one-day 3% drop in the DJIA… what conditions would have to exist for you to purchase stocks with a more care-free attitude?  Would you be more comfortable buying after a 3% rise in the market? That doesn’t make a lot of sense to me.  How about after a lengthy period of flat returns?

Shipping ContainersThere are things going on in the economic world that give me concern about the next several years in the stock market. First and foremost, China and trade. After that: China and trade. Slowing growth in the US and world economies, negative fixed income yields in Europe, US (and other) government deficit spending at incomprehensible levels, and even Boeing’s problems raise my recession radar as well. So, what am I doing, you might ask?

I am making sure I have my emergency cash cache fully funded. I’m building a little cash on the side for buying opportunities that may come along and buying when the opportunities actually do come along.

You know what I mean: I’m doing what I do in every other market situation.

September 2019

Content in this material is for general information only and not intended to provide recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. No strategy assures success or protects against loss. Investing involves risk including loss of principal.

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