In other words, investors had several opportunities to get out over a period of months without significant loss.
We all want to be able to sell high and then buy back in when stocks are low. Invariably, no one will top tick selling at the absolute high. The good news, though, is that you don’t have to. Sometimes we can be so focused on the daily fluctuations that we miss the big picture.
For instance, I have been warning investors for several months that I believe it is time to sell high. You may have a different view, but perhaps we all can be aware of this philosophy of protecting gains.
Since my first warnings, we saw the major market indexes drop over 10% over a period of a few days in August. Those that sold during the pain associated with that crash may feel that they made a mistake because the markets have mostly recovered. Some are even using the fact that the markets recovered as evidence that all is OK—just like they did in 2000 and again in 2007. I’m not saying that this is an exact replica, but the patterns and emotions are similar.
I can’t tell you exactly when the next bear market will start. It is possible that is has already started because even with the market recovering we still haven’t surpassed the summer highs in the S&P 500 and the Russell 2000. The correction in August could be the harbinger of more volatility ahead. Or the markets could continue to go up. But here is the point: it is highly unlikely that you will get out at the perfect time. Let’s say that by getting out now you miss the S&P 500 going up another 5%. How much will that matter is sometime in the next year the market drops 10 to 20 percent or more?
In my opinion, we are at that point where it behooves investors to move some money out of the stock market (perhaps to US Treasury Bonds and cash). It’s up to each investor to make there own decisions to do nothing, make moves incrementally, or all at once, but the main point is that investors are once again in the position to sell higher and lock in some of the gains of the last several years.
Thanks for reading and have a great weekend.
Further reading from Jeff: Will The Federal Reserve Kill The Economy?
Author holds various positions in US treasury bonds at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.