No. 7445Anonymous 23rd December 2018 Sunday 6:36 pm7445Stock Market, This Is Fine Edition
Are any of you lads caught up in the stock market jitters of the past few weeks?
I am still long on a few S&P500 sector leaders, and naturally I'm not comfortable with the way they have tanked. Got out of all my FTSE100 stocks at the beginning of this summer, and not to my disadvantage, it seems.
So what to do now? Get out of my remaining stocks and cut my losses? Wait for a rebound and then sell the hopefully ensuing bear market rally? Or just hold until this all blows over?
Why the fuck would you go in American stocks when it was obvious that the Fed would raise interest rates? You do know what happens to shares when interest rates go up, right?
Set a limit for losses and always stick to them - chasing / waiting out losses to rebound never, ever works and there is probably better places for your (reduced) money in the meantime.
The Fed is raising rates, Trump is a lunatic and that's before we get into the turmoil that will almost certainly plague the markets for the next five months around Brexit. Are you expecting a miracle?
The only stocks I hold at present are those of the company I work for (which is in FTSE250) - bad form to get out of those while still gainfully employed.
Cash, funds, bonds, hell - horses might be a better place for your money at the moment.
I bought my S&P stocks in May this year when the index started showing signs of recovering from its slump a few weeks earlier. I was right to do so, as it turned out, hoping that strong corporate gains from Trump's tax cuts would offset QE tightening. but I then kind of missed the boat because obviously the S&P has plummeted since the ATH in early October.
Really didn't think we would go from ATH to bear market in just ten weeks.
Glad I made the right call on the FTSE though. My pertaining portfolio would be worth nearly 15 percent less now, i.e. worse than the index's performance. Sold it all near the market high. With Brexit, it's not where you want your money in the foreseeable future.
>chasing / waiting out losses to rebound never, ever works
It depends. In a strong uptrend with the stock of a fundamentally healthy company, against the backdrop of a strong economy and other positive market determinants, an intermittent dip can be waited out. On the other hand, nobody tells you when that strong uptrend will fizzle out and a stock is going significantly lower with no hope of bouncing back to your break even point.
>>7448 >With Brexit, it's not where you want your money in the foreseeable future.
Value stocks are exceedingly cheap, relative to their fundamentals. I'd expect there to be a cyclical change in 2019 from growth stocks, particularly tech ones, to value stocks performing strongly. If you're prepared to hold then there's bargains to be had.
>Value stocks are exceedingly cheap, relative to their fundamentals
That's a double edged sword though. There are two reasons why stocks can be cheap relative to fundamentals, for example if you take earnings multiples. One is that the market is genuinely oversold due to a sudden panic that just dragged profitable companies down with all the rest of the stocks. That indeed presents a buying opportunity. We had that in many (European) indexes right after the Brexit vote, where the overall picture for the coming months or year was nowhere near as grim as it seemed on the day of the Brexit sell off.
The other possibility, however, is that stocks are cheap relative to current earnings because they are expensive relative to future earnings. That's a huge pitfall right there. A stock may trade at 12 times 2018 earnings at the moment, and that's a decent price earnings ratio, but if your earnings are feared to go down 40 percent in 2019, as they very well might with some stocks if the economic outlook worsens, then suddenly you have a PER for 2019 (at the current stock price) of exactly 20. And as a value investor, that's no sweet spot to get in on. It's very likely that your stock will not have seen its bottom despite a recent slump. Your stock would have to go down another 40 percent to get you the same kind of PER of 12 for 2019 as it does now for 2018.
Having said that, I think markets are at the moment pricing in that there could be a recession. But as markets often do, they tend to exaggerate the actual big picture. At the point where we are at right now, after almost an entire month of ceaseless panic selling and a whole 4th quarter of sizeable overall down movement, there is a good chance we've undershot even the grimmest worst case scenarios for 2019 and beyond. Stocks are really remarkably oversold right now, going by various technical indicators. There is at least some room for short-term speculation to the upside again.