There's A Lot That's Different But The Important Stuff Is The Same


All of Germany's sovereign debt has a negative yield. There are trillions in negative yielding debt outstanding around the world. Austria issued 100 debt that now yields in the ones. Greek ten year paper yields 2.06%. Global markets are trying to process how big of a threat tariffs might be. The FOMC just cut rates with equities close to highs and employment close to lows. Bitcoin in the nano (not macro or micro but nano) is exhibiting haven qualities as it rallies on days that stocks drop. Please note I am not saying I expect Bitcoin to now be a haven asset going forward, I have no idea about that, just that right here right now (like this week) it has been going up. Gold for that matter has been going up too.

These are things that might be different, I will say they are details and that they are in fact different. If you can accept that the details are different, I have argued regularly that the details are always different, I still maintain the market manifestations will be the same...if something bad is even coming.

The next time something bad happens in markets, whether that is starting now or at some point in the future, the market manifestations will be the same. The market will start out going down a little bit. At some point the small decline gets bigger and people scared, believing that somehow the market will do something different this time. There will be panic and TV specials and then the bottom will be made for no real obvious reason and stocks will go back up eventually making a new high. The only variable is how long that all takes.

When you truly understand that this is how it works, it makes downturns much easier to endure in terms of emotions which in turn reduces the odds of panic selling. Think about last December, that was a fast and panic-inducing decline that amounted to nothing of consequence; well, no consequence to those who did not panic. At this point, the market is well within the realm of down a little, normal down a little. Some would tell you that the Fed is trying to remove volatility from markets so when volatility pops back up it seems like it is different. It's not.

I say this all the time, no matter what you're strategy is, just stick to it. If you take defensive action based on some objective measure, take it when the time comes. If your strategy is buy and hold on no matter what, then you should hold on no matter what. You chose some sort of approach when you were not emotional, it is crucial that you stick with that approach if emotions ever come into play.

I still have positions in a couple of low/negative correlation type funds for clients and the Pacer Trend Pilot ETF (PTLC) will go defensive if markets deteriorate with the S&P 500 going below its 200 day moving average (the index is still a ways from its 200 DMA).