Fear and panic can lead to missed investment opportunities, even in the strongest bull markets.
Post-bear-market negativity is a common pitfall for investors, but focusing on practical strategies like diversification and asset allocation is essential.
Don’t rely solely on expert advice or economic predictions – focus on reality and your own investment goals to avoid unnecessary risk.
In March 2009, the subprime mortgage meltdown devastated investors and the financial system. The market had fallen some 58% from its October 2007 peak.
S&P 500 Weekly Chart
The market then rallied for five months in a row from March 2009.
But the narrative for investors and industry professionals was that this was just a technical bounce and that we would go back down, so buy at your own risk!
Market Rally After Hitting Lows
Source: Fundstrat, Bloomberg
What followed was history, one of the best decades with one of the strongest bull markets ever.
This happens all the time. When you add economists, media, and fund managers who ride the post-bear-market negativity, it is easy to fall prey to fear and panic.
I heard another story that one of the possible reasons for the next big crash (which seems imminent) is falling profits.
Falling Profits and Rising Markets
It is a pity that after a bear market like the one in 2022, the markets have had the biggest bounces in history (grey columns)… with falling profits (red columns).
So, the game is always the same: We can be either bearish or bullish, and for each thesis, we can always find some data, some chart, or some expert to confirm our cognitive BIAS.
But then, we have to come back to reality and remember the usual boring stuff: CAP, diversification, strategic and tactical asset allocation, and rebalancing, which I will repeat endlessly.
To try and put some practical spin on these things, I’ve also started a column on a 60/40 2030 horizon in the hope that it will help.
Finally, the famous pros, here is how they have performed over the last ten years against the index:
Hedge Funds Vs. S&P 500
Source: NYU School
They didn’t beat it a single year. So, what are we talking about? If you listen to everybody, you only risk getting hurt.
Disclaimer:This article is for informational purposes only and does not constitute a solicitation, offer, advice, or recommendation to invest as such, nor is it intended to encourage the purchase of any investment. I want to remind you that any type of asset is highly risky and valued from many perspectives. Therefore, any investment decision and the associated risk remain with the investor.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
