In light of the dramatic stock market sell off we wanted to bring you up to date on our thinking. In our most recent update we reported many short-term technical market indicators had reached oversold levels and the stage was set for a stock market rebound. However, every brief rally has given way to continued weakness.
The additional decline for stocks this month has left the markets extremely stretched on the downside. In technical terms, this is an oversold condition that occurs on rare occasions often coinciding with investor panic. We like to say that the stock market is nothing more than fear and greed superimposed on the business cycle. Where are we today? CNN Business publishes a “Fear & Greed Index” (pictured below), which attempts to measure the current emotional state of investors. It can range from a maximum “Greed” reading of 100 to a maximum “Fear” reading of 0. The most recent reading (3), clearly demonstrates that fear reigns supreme and historically this level of extreme fear has been an excellent indicator for future stock market returns.
Turn Your Emotions Upside/Down
When the Fear and Greed index has been below 15, stocks have earned higher returns when compared to other more muted readings. Legendary value investor, Warren Buffett’s famous quote comes to mind, “Be fearful when others are greedy and be greedy when others are fearful.”
We know it is terribly hard to hold steady at times like these, but we believe the prudent course is to stay patient. Looking past current volatility, while the market deals in probabilities, not certainties, the probabilities favor a strong relief rally can begin soon. We will be watching closely to see if the market can regain healthy upside momentum. In the meantime your investment portfolio is diversified with many high quality stocks and bonds. That combination will produce dependable income while we patiently wait for long term capital gains to accrue.
We appreciate your patience, perseverance, and loyalty to stick with your investment process through the inevitable ups and downs of investing.
Looking forward to a Happy and Prosperous 2019!
Disclaimer: Pring Turner is a Financial Advisor headquartered in Walnut Creek CA, and is registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. The views represented herein are Pring Turner’s own and all information is obtained from sources believed to be accurate and reliable. This information should not be considered a solicitation or offer to provide any service in any jurisdiction where it would be unlawful to do so. All indices are unmanaged and are not available for direct investment. Past performance does not guarantee future results.
Articles filed under Market Commentary
September 23, 2022 - This year marks Pring Turner’s 45th year of helping clients protect and grow their wealth. Over the decades, we have successfully helped our clients navigate through many bull and bear markets. A key lesson we learned along the way is... Continue Reading
March 4, 2022 - This year, we celebrate 45 years in business and could not be more proud of this team and are honored to have worked with some of the best clients. YOU are the reason we’re able to celebrate this milestone and... Continue Reading
May 22, 2020 - We continue to monitor the economic situation and where appropriate are making adjustments to your investments. This video update (click here to watch) is designed to keep you informed on the decision making process we are utilizing to navigate your... Continue Reading
April 10, 2019 - Wow! The first three months of market returns sure made a nice year for investors! As we pointed out in the January newsletter, “Our strong belief is that this temporary [Fall 2018] stock market setback sets up for a stronger... Continue Reading
February 8, 2019 - Joe Turner was the guest speaker at the San Francisco Technical Securities Analysts Association webinar on January 10, to present his 2019 financial market outlook. The TSAA – SF is the oldest society dedicated to helping investors become more knowledgeable... Continue Reading