Readers know I expected things to fall. One can never be certain when trying to predict the actions of others. but Powell keeps saying the same thing over and over, and I don’t understand why market optimists are optimistic.
Markets usually test their lows, so I would think that we have another 1% down to those levels, then maybe a bounce at support. If it slices through those levels next week, things will be bad for a bit. I expect prices to get lower after a bounce. But I’m not a stock expert(!!) I like trying to understand complex systems, and the stock market is more like biology than most people realize. You have human beings, after all, moving it around based on stock chart patterns, international affairs, sentiment, and of course fear and greed. Fun stuff, especially if you aren’t ‘fully invested’.
A family member recently saw a financial advisor. I tried to offer good questions for her to ask during the ‘interview’, but most young people are completely bound to the message that ‘you can’t time the market – just buy and hold.’ And maybe that’s what most people should do. Or maybe not. I agree that I have NO idea what the market will do on any particular day, UNLESS the S&P 500 has been trading below a significant moving average and is bumping against ‘resistance’… OR it has been above a significant moving average and is bumping against ‘support.’ In those cases I would NOT bet the farm, but odds of it going a certain direction are better than anything you would get in Vegas. Of course a major news story could negate all of that, as when China elected not to shoot down Nancy Pelosi’s jet a few weeks ago, and the market rose through resistance (for a short time) in response.
Isn’t all of this fun? People run around yelling over this stuff. Or at least they used to, before machines took over the trading floor. But it is still humans programming the machines. At least for now!
Likewise if the Fed says ‘asset prices are too high, and we have to lower them, and it will be painful for some’, I do not see that as an invitation to buy stocks. Inflation is almost ALWAYS bad for the stock market, as anyone with a little knowlege of financial history knows.
But investment advisors, mostly, tell clients that ‘nobody can time the market and only idiots would try.’ Why would they say that? Call me a cynic, but I wish I could tell medical patients ‘nobody can do anything that makes you feel better.’ Wouldn’t that take off some of the pressure on me? If the market falls 70%, an advisor can say ‘look – you only lost 68%! WE beat the market!!!’
If you can’t time the market, an advisor can put you in index funds and call it a day. Heck, a psychiatrist could do that!! But if you COULD do certain things… not time it day to day, but watch out for bad times and have the patience to wait for good times… the job of a financial advisor would be much more interesting, and much more difficult.
I am NOT a financial advisor, and I do NOT consider myself qualified to provide investment advice. I just want to educate people on another complex system. Oh, one more thing… fundamental analysis vs. technical analysis… fundamental analysis looks at corporate earnings, corporate leadership, sector growth, opportunities, projects in the works, changes in tax code…. they find the value of a company, divide by the number of shares, and come up with a projected stock price. They think that the technical folks are idiots.
Technical analysis looks at charts. Lots of charts, trying to find patterns that suggest one thing or another. Technical analysts say that they don’t need to know anything about the finances of a company – just price history. I used to see technical analysis as silly until I realized half of Wall Street uses it to make decisions. It is a self-fulfilling prophecy. If most people think that the market usually retests its lows, the market will tend to retest its lows. Technical analysis folks think that the fundamental people are idiots.
I have to go… this is my day off. I will take a look at things before 3 PM central time… the last 10 minutes of the trading day are interesting, again, if you aren’t investing your life savings. Do NOT trust me, but do learn from me. I’ve made many mistakes over 30 yrs, and mistakes are great opportunities to learn. Be careful out there!