Aside from extending our warmest wishes to you for a Happy Thanksgiving, we want to remind you that there is something else happening this time of year. We’re entering the strongest part of the year for the stock market as well as one that historically has the best chance to surprise everyone to the upside now that the midterm elections have passed.
Everyone following the markets is aware that we’re dealing with global economic stresses, a bottle necked supply chain, geopolitical tensions, 40 year highs with inflation, rising rates, and literally the worst start to a stock market year since 1970. It’s got the entire crowd nodding their heads in agreement that these are some brutal times. We’re also clearly in an environment with much groupthink and division…but more on that later.
That’s exactly where we’re at right now. We’re not going to wait for the financial media to announce it or tell us that it’s only a bear market if we officially drop -20% or more. The intent of this article is to explain not only what a real bear market is, and how this one has behaved differently, but also what to do next.
We’ll open this letter to our friend “Mr. Market” by stating one thing that will be very obvious in six to 12 months. 90% of people reading this article will have gotten it wrong. It’s not your fault though…it’s the way our minds are wired and the content we’re constantly being fed.
Regardless of your current market strategy it’s times like this that will test the most patient of long-term investors. We’ve written about this countless times but no matter what the sage counsel or stock market adage is, you should be rattled right now. We could be like most “perma-bull” financial advisors and try to data mine for all the reasons to stay calm or share positive anecdotes to convince you that now is the time to invest; it won’t matter though. Putting “lipstick on a pig” won’t help you nor the current market environment. Bad news and reasons to panic will be the headline for the weeks to come and there will seemingly be no safe place to hide.
Does the old stock market adage of “sell in May and go away” make sense? We’ve actually written about this one spring about nine years ago where we actually advocated taking some chips off the table, however it had less to do with a cute stock market rhyme and more due to profit taking. Where are we at now going into May and is this allegedly poor seasonal time of year appropriate to sell or perhaps not?