As I predicted in my market update this past weekend, this is likely to be the bottom of this drop as I believe markets will capitulate this morning and the markets will start to move higher. The moves lower are a dramatic overreaction and today we will likely see a wave of panic selling. Steep market declines are never comfortable. Don’t sell, stay calm. If you have money on the sidelines this might be a good time to deploy some of it.
The biggest days of market gains usually come right after massive drops. Therefore, avoiding the market’s downs may mean missing out on the ups as well. Seventy-eight percent of the stock market’s best days have occurred during a bear market or during the first two months of a bull market. If you missed the market’s 10 best days over the past 30 years, your returns would have been cut in half. And missing the best 30 days would have reduced your returns by an astonishing 83%.
Furthermore, all the doomsday pundits that are coming on TV are presupposing we keep all these tariffs on in perpetuity. President Trump is transactional, he will try to make deals. His negotiating style this time around is more extreme, more shock and awe. However, at the end of the day his goal is the same: bring countries to the table and negotiate better trade deals.
I would expect the market to bottom out today now that China announced their retaliation. Then I would expect a rally off the bottom as different trade deals get announced and tariffs start to come off in the coming weeks. The recovery won’t be immediate because even if we get a bevy of trade deals, the one markets care about is China. I believe the negotiations with China will linger on for possibly a couple of months. I think there is a good probability however that we put in the bottom of this drop today. Don’t expect a rally all the way back to the highs right away. It will depend on how quickly a trade deal gets done with China, how quickly Congress extends the tax cuts and what if anything the Fed does.
The calendar link allows you to schedule a call as early as the next day. I opened up additional hours and have been trying to speak to as many of you as possible.
