Commentary About Recent Market Moves - Carroll Financial
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March 11, 2020

Commentary About Recent Market Moves

Author: Marty Moore, CFP®


Over the past couple of weeks we’ve passed along some of our thoughts about the current market.  I thought it might be helpful to now pass along some thoughts of others.  Below is recent commentary from people whose views and opinions I value and respect.

From financial advisor Josh Brown:

Good morning.  Stocks were halted after a 7% drop, which triggered the first of three circuit-breakers designed to give buyers and sellers a chance to regroup during moments of extreme volatility.

The system is clearing itself of over-leveraged players, forced liquidators and panic sellers. There are people selling for a variety of reasons, but everything that gets sold, from (shares of stock) to a barrel of oil, must also have a buyer on the other side.

You will see and hear amazing things today and this week – in stock prices, in oil prices, in government and central bank response. It’s going to be a time you’ll look back on. Unprecedented things are taking place, such as the entire US Treasury yield curve now below one percent for the first time ever, which we saw happen this morning – meaning every US bond, from the 3-month T-Bill to the 30-year Treasury, currently yields less than 1%. The 10-year has gone from 1.5% to 1% to .5% in three sessions. Utterly historic.
No, nobody “called this”.  I mean, plenty of people had been calling for recession this year but they are the same people who have been calling for recession every year. There are people who spent ten years and about 23,000 Dow points predicting bear markets perpetually. This doesn’t take any talent. If you can find me someone who was a bull until January and then a bear beginning in February I will be suitably impressed. But even that person will not have the ability to tell you when it’s over and time to get bullish again. A perfectly correct economic or market call, that cannot be systematized and repeated in the future, is worth just as much as no call at all. Unless this was your very last year as an investor.
As improbable as bonds had looked for forward returns at the end of 2019, they have worked spectacularly well during the recent panic. These segments of your asset allocation are there to play defense for you. They come to represent the dry powder – so that when you rebalance into stocks that have gotten killed, you have somewhere to take the capital from that has performed well. Do this systematically over time and volatility’s effects have been negated. 
“Why don’t we just sell everything and wait this out? Get back in when the dust settles?” This is the question every financial advisor is getting this week, from at least one or two clients. They’re asking out of genuine curiosity, not just panic or fear. And it’s a great question. The great answer is that you won’t know when the dust settles. There’s no airplane writing the “all clear” in the sky above your neighborhood. And when the dust settles, do you think stocks will be at their lows? Or will they have already rallied furiously, in anticipation of this? Let me give you an example. Today is March 9th. Precisely eleven years ago today, in 2009, the stock market stopped going down. There was no reason. The dust had settled, without fanfare or any sort of official announcement. If you had polled people that day, or week or even month, most would not have agreed that we had seen the worst. The economic headlines were not improving. But there it was. And by June 1st, less than 3 months later, the stock market had climbed 41% from that March low. And even with that having happened, the majority of participants still weren’t clear that the dust had fully settled. That we had, in fact, seen the worst. There were still people calling us 3, 5 and 7 years later who had gone to cash and still hadn’t gotten back into stocks. They missed a new record-high a few years later and hundreds of percentage points in compounding on their assets.
All-in or all-out are terrible strategies. You cannot afford to miss the 25 best days in the market, or your returns are wiped out and you may as well have simply sat in 5-year Treasurys. The catch is that the 25 best days are frequently clustered among the 25 worst days. You can’t have the up without the down. Anyone promising you otherwise is either uninformed or a liar. I have often observed that it’s usually some combination of the two. In October of 2011, we were in the midst of the European Debt Crisis and stocks were rising and falling by 2 and 3% every day. Volatility was off the charts. I wrote about the stupidity of being all-in or all-out nine years ago, in the middle of that storm, and every word of it still rings true right now.

To read the full article:

From Adam Grossman:

So should we simply write off the market as crazy and unpredictable? To answer this question, it’s worth taking a step back and looking at what drives share prices. As I see it, there are three major factors:

  1. Corporate profits, including expectations for future company earnings.
  2. External events, including political news, economic developments and, of course, health scares.
  3. Investor sentiment.

From day to day, the share price of each individual company reflects some combination of all three factors. In recent weeks, however, there’s no question that Nos. 2 and 3 have been in the driver’s seat. The coronavirus is almost entirely responsible for the market’s drop. But over the long-term, it’s No. 1—corporate profits—that has the largest impact on stock prices.

To read the full article:

From Dennis Freedman:

What I find surprising about the stock market isn’t its recent dramatic pullback, but how I’ve reacted. I simply haven’t paid much attention. It’s just been business as usual. I haven’t even looked at my portfolio or watched CNBC.

Such a calm demeanor is unusual for me. A few years ago, if I experienced this type of market decline, I would have made big changes to my portfolio. Yet this time around, I just shrugged my shoulders.

When I recall the bear markets I’ve lived through, what I think about most are not the massive declines in the market indexes, but my futile attempts to protect my investment portfolio from losses. Those ill-advised portfolio changes are what haunt me today, not the bear markets themselves.

If this market decline is the start of a new bear market, I’ve learned my lesson: I’m determined to ride this one out. So far, I haven’t even flinched. It’s business as usual for me.

To read the full article:

From Wall Street Journal columnist Jonathan Clements:

I’m managing my money with an eye to making it last another three decades. And yet, everywhere I turn, it seems somebody’s insisting I pay attention to what’s happening in the financial markets right now.

This isn’t just a coronavirus phenomenon. It is, alas, standard operating procedure for the financial media.

I understand the game. I’ve spent most of my career as a journalist, so I realize it’s no small undertaking to fill up a newspaper, the airwaves or a website every day. Daily market stories are not only reliable fodder, but also they grab readers’ attention. Still, couldn’t the media do just a little bit better?

Watching, reading or listening to a financial journalist? Try slotting his or her reporting into one of seven categories, ranging from dangerous to enlightening:

  1. Daily updates
  2. Trend stories
  3. Market analysis
  4. Portfolio building
  5. Personal finance
  6. Big picture
  7. Money and life

To read the full article:

From Morgan Housel:

In the 1930s an Ohio lawyer named Benjamin Roth kept a detailed diary about what he saw during the Great Depression.

In the late 1930s, when the depression had mostly passed, he summarized a few points he had learned from the debacle. He wrote:

“Business will always come back. It will remain neither depressed nor exalted.”

“The stock market forecasts business in only a limited way. The beginning of a stock market movement usually is caused by the trend of business but in the end the movement is carried too high or too low—by the extreme optimism or despair of human nature.”

“Depression is time of greatest profit. The investor who has liquid funds and the courage to act can lay the basis for great profits.”

It’s silly to compare the last week to the Great Depression – unemployment is near a record low and the market is still up over the last 10 months. It’s also hard to think of a time when sentiment has changed so far, so fast, than the last week. And what’s really silly is to assume that abrupt shift won’t both feed on itself and lead to tangible economic problems.
Keep a few things in mind:

  1. Booms plant the seeds of busts. Busts do the same in the opposite direction.
  2. What you see on CNBC and Twitter is not representative of 98% of the country.
  3. Optimism and pessimism will always overshoot because the boundaries of both can only be known in hindsight, once they’re passed.

It looks bad today.

It might look bad tomorrow.

We’ll get through this.

But hang in there.

To read the full article:


From Charles Schwab and Factset:


Again, from Josh Brown:

I am 100% confident that the US economy will rebound from this challenge, but also 100% confident that the markets will overreact to it, which is part of the process and should be expected.


What we’ll be doing

Over the coming days we will be looking to do two things:

  1. Capture tax losses where available.  In taxable accounts most holdings still have large gains built up over the past several years but recent purchases may now have losses with the recent market slide.  We’ll capture these losses where we can to help reduce this year’s taxes for you.
  2. Rebalancing accounts.  In some accounts the recent market decline has significantly shifted the targeted allocation between stocks and bonds.  The systematic process for rebalancing to bring the account back to the targeted allocation is the closest thing to selling high and buying low that is achievable.

This is a crazy time – dealing with the unknowns of Covid-19, an unfolding oil price war between Saudi Arabia and Russia, and a fragile stock market.  Please don’t hesitate to call if you have any questions or would like to discuss the current environment.


As always, thanks for reading.


In the News, Market Volatility

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