Since I last wrote My Gut Feeling, that noise pollution I referred to has gotten rather toxic. On Tuesday, after the market closed, a special counsel, former FBI Director, Robert Mueller was appointed “to oversee the previously-confirmed FBI investigation of Russian government efforts to influence the 2016 presidential election and related matters.”
On Wednesday, the market went into a tizzy, implying that the appointment would cause some constitutional and financial crisis. Then the big decline on Wednesday was reversed, on Thursday and Friday, albeit, not entirely. I used the decline on Wednesday to put cash to work from my mobile office (my wife and I drove east for the summer from Nevada) on Thursday and Friday.
Did the market fall because of the political appointment or was the news just an excuse to sell? I argue the latter. Market grey beards (after 33 years in the business, I guess I can be counted as one) know that in bull markets, stocks rise on an escalator and fall in an elevator. That is to say that the markets rise gradually over a long period of time and then without warning take a dive. This was a market looking for an excuse to pullback and it got one on Tuesday evening.
We have been riding the escalator ever since the markets bottomed in February 2016. That fact has been more apparent since the Presidential Election . Every occasionally, we step on an elevator, and the markets tumble. For example, in just the last few months: on September 9, the Standard & Poor’s 500 Index (SPX) dropped 2.45% to 2,127; on September 13, the SPX declined 1.48% to (again) 2,127; on October 11, the SPX slipped 1.24% to 2,136; on March 21, the SPX fell 1.24% to 2,344; and then last Wednesday the SPX got slammed 1.82% to 2,357. On Friday, the index closed at 2,381.
As I mentioned in prior commentary, I spoke at The Money Show last Tuesday. I arrived early to hear my colleague Jeffrey Saut of Raymond James Financial (RJF) present his macro views on the stock market. It was a great lecture and I suggest you read Jeff or catch him on the financial networks whenever you can. Jeff, as do my good friends and colleagues Tony Dwyer of Canaccord Genuity and Brian Reynolds of New Albion Partner are all of the opinion that we are in the early stages of a secular bull market. Those bull markets tend to last 15-18 years. The last one went from 1982 to 2000. Depending on when you think the latest bull market began (most strategists believe that it was not 2009 but 2013) we have a long way to go. However, during those secular bull markets, sharp declines or corrections can occur. Brian also looks at credit cycles within stock bull markets as part of his research. Remember the 1987 stock market crash? It happened in the first third of the 1980s-1990s bull market. Then there was the Asia Contagion which happened toward the last part of that bull market.
By the way, last Tuesday was a long day as after my second presentation at The Money Show, my wife and I caught Alonzo Bodden at Brad Garrett’s Comedy Club. After we had drinks with Alonzo. Alonzo and I met several years ago in Lake George when he came to my restaurant after appearing at a comedy show during Americade. Alonzo was the winner of Last Comic Standing.
So, stay on the escalator and don’t be afraid of the occasional elevator in bull markets. Also, catch my friend Alonzo when he comes to your town and watch his Historically Incorrect Show on Showtime.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long SSO & SPXL— although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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