A Weekly Fear Epidemic

What do you do when the Dow plunges over 4,000 points, or more than 14%, in just five trading sessions?

Well, as my Salem Radio Network colleague Larry Elder is fond of saying, you “pass the Advil.”

That Advil has indeed come in handy this week, as has that bottle of my finest fermented agave, as we’ve all watched the value of our equity holdings decline precipitously. Yet despite the very sharp pullback that’s taken place in stocks, we might want to ask ourselves: What’s motivating the selling?

The answer, of course, is fear — pure and simple.

Fear that the coronavirus will spread into a truly disastrous global pandemic that will threaten thousands more lives and shut down the global economy.

Fear that companies will continue to reduce revenue and earnings projections as this virus clamps down on global commerce.

Fear from hedge funds and professional money managers that all of the gains that were earned in 2019 will be wiped away in just five trading sessions.

Today, I read a report from Brian Belski of BMO Capital Markets titled, “Epidemic in Fear.” Now, Belski is a well-known equity bull. In fact, I don’t remember him ever being bearish. Yet right now, I think we all can benefit from Belski’s assessment which basically says that the world has been enveloped with fear over the coronavirus and its negative implications for the past couple of weeks and that there has been a very aggressive overreaction to this situation in the financial markets.

While I suspect Belski is correct here, I also realize that it’s hard to just sit idly by and keep your head when all about you are losing theirs. And it’s especially trying when you realize that this is one of the worst weeks for stocks in history.

Now, does this week compare to the worst day in market history? No, not even close.

Those of us old enough to remember the that one day back on Oct. 19, 1987 also remember that the Dow plunged more than 22% in a single trading session.

Back then, the meltdown involved a case of “sell first, ask questions later.” Today, that same sentiment has been operating on Wall Street this week. Now, as widespread as the selling has been in this market, it seems that there are no safe places to hide.

And while I know it’s difficult to watch the value of your 401(k), IRA and taxable trading accounts falter, I recommend holding firm to your positions in the face of this selloff.

In fact, if you have a long-term time horizon, then this hiccup, as uncomfortable as it might be now, does represent a buying opportunity for the biggest and best dividend stocks such as those that are in our Income Multipliers Portfolio.

As for our tactical positions, the table below shows that the Tactical Trends Portfolio (TTP) has held up quite nicely in the face of this week’s selling.

Now, I do not want to sell into this market right now, as I think we will end up regretting it. I do, however, want to make sure we preserve the gains that we have accrued. So, in the days to come, we may act to sell some of our winners and protect our money from any further downside.

That said, I suspect the next significant leg in this market will be to the upside. Whether that leg lasts long and when that will actually take place, nobody knows for certain. Yet what I do know for certain is that the fear trade has gotten way too overcrowded. That means the pendulum will surely swing back in the bulls’ direction faster than I suspect most people think it will.

Finally, although this week has been truly bad in terms of wealth destruction, investor anxiety, the future prospects for global economic growth and society’s general sentiment over what might happen next with the coronavirus, I implore you to remain placid, steadfast and strong.

Indeed, the only way to live your life with purpose and the only way to help yourself and those you love is by staying calm, not panicking and not allowing the market’s angst to become your personal angst. Now, that’s much easier said than done, I grant you, but what real choice do you have in the face of adversity? Sure, you can have a meltdown, if you choose that path, but then, where does that get you?

For me, and I hope for you, there is no rational alternative but to be strong, be steadfast and go placidly among the amid the noise and the haste.

In the name of the best within us,

Jim Woods

Editor

Intelligence Report