Since the current bull market began in 2013, the stock markets have experienced a series of panics:
- In 2013, the “Taper Tantrum” as markets feared the removal of policy accommodation by the US Federal Reserve FOMC
- In 2014, the “Great Ebola Scare” when we were all supposed to perish from the deadly disease imported from Africa
- In 2015, the “China Currency Devaluation” – by the way, Goldman Sachs (GS) just yesterday prognosticated a further Chinese currency devaluation
- In 2016, we had two panics: 1) the crude oil crash and 2) the “Brexit Panic” Although, you might consider a third when markets tanked on Presidential Election night when it seemed that Hillary Clinton would win. She did not and market reversed instantaneously.
- In 2018, we were brought another FOMC disaster, the “Powell Panic”
- In 2019, the “Tariff Tantrum” because of President Trump’s hard stance on trade negotiations with China, and use of tariff threats to protect against the growing crisis on the southern border with Mexico.
Every time, these panics were opportunities to buy stocks and not exit from the stock market. If you don’t believe me, just look at a chart of the Standard & Poor’s 500 (SPX) Index since 2013.
My job is to manage risk, look for opportunities and play financial psychologist. The hardest part of that job is to walk clients back off the edge of the cliff when each of those panics occur.
There is a big difference between panics and bear markets. A panic is short lived and lacks rational financial behavior. Bear markets are created and exist in an environment of economic malaise which lasts for a prolonged period of many years.
Of course, within bull markets, there are some sectors which may be in their own individual counter-cyclical markets. Take for example financial stocks and precious metals. You would have under-performed owning financial stocks and small cap stocks (in general) the past two years. Gold and silver, which peaked in 2011, are fools’ investments. As I say, gold only has value for the smile that it puts on my wife’s face when I give her a gift.
With the Tariff Tantrum having passed and bond yields so low that they barely are greater than the average SPX yield, the risk scale has tipped toward bonds and the return scale has tipped toward stocks. That of course, is until the next panic occurs, which I hope won’t happen till 2020.
By the way, as I expected, the labor report for May was a bit light and was likely due to the severe weather across the nation which lasted for two weeks for the month.
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
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage, and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
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