Don't Let Tweets Drive Portfolio Decisions


I'm a big believer in explanation fallacy which basically says that people feel better in the face of a negative outcome when there is an accompanying explanation. This is why there are daily headlines that say the market went up because of this or that or the market dropped because of such and such. In reality, there isn't necessarily any reason for what the market does from day to day.

This belief was certainly put to the test this week in the face of several executive Tweet storms covering various subjects. It is worth pointing out that regardless of what, if anything caused the selloff and no matter where it goes from here, there is zero reason to deviate from whatever your chosen investment strategy is. Mine involves taking defensive action if the S&P 500 breaches it's 200 day moving average (DMA). The index is 45 points away. I don't know if a breach is coming imminently or not but I will act accordingly whenever the next breach comes no matter the timing or the reasons.

The next time a breach becomes a serious downdraft, it is already known what will happen. The decline will be big, it will scare a lot of people because they will think it's different, then the decline will just stop and from there the market will go back up and on to a new high. The only variable is how long that all takes.

Short post because it's that simple. Relax and just stick to your strategy no matter what it is.