Six young people wake up in an abandoned building, with no idea of what is going on or how they got there. A mysterious voice whispers to them over a PA system telling them they are on a game show called Are You Scared? They will have to face their deepest fears in order to win the contest. However, their challenges are real – and deadly. The show involves several “contests,” each of which results in the grisly deaths of the contestants, including death by acid, explosion, shotgun, hungry rats, strangulation, power drill, and decapitation.
That’s the plot of a movie from 2006 called Are You Scared?
Critiques for Are You Scared have been predominantly negative calling it “Saw for Dummies” and a “shameless knock-off” of the more successful Saw series. However, it is a good segue to my topic today Are You Scared … of the Market?
Hopefully, you are not
But, on the other hand, who wouldn’t be. Few stocks have been left unscathed this week by the news cycle. Shares of banks and technology firms were dragged sharply lower, punctuating the worst week for major U.S. stock indexes in more than two years.
Last week’s selling highlighted investors’ surging anxiety over a wide range of worries. Worries that included;
- The White House’s increasingly protectionist trade agenda,
- Rising interest rates and
- Collapsing bets on technology giants that had powered much of the stock market’s rally until recently.
The Dow industrials lost more than 1,100 points in the week’s final two sessions.
Financial stocks in the S&P 500 dropped 3% Friday, with Bank of America and Morgan Stanley falling nearly 5% apiece. Tech stocks slid nearly as much, with Facebook posting its third-worst weekly fall on record.
The most notable reason for this week’s selloff was an announcement by the Trump administration that it would impose tariffs on tens of billions of dollars of Chinese imports and tax steel and aluminum imports. That fueled worries that a trade war could escalate and, in the process, hurt U.S. manufacturers that sell goods abroad in the process.
The stock market should be peppy this year, as sharp cuts in the corporate tax rate are goosing profits. Instead, it can’t seem to shake the feeling that something bad is about to happen.
Look under your bed
It’s acting like a kid who has to check around each corner as he ventures down a long dark hallway.
Or a child who has to check under the bed for monsters before taking a giant leap from the doorway to the safety of his down comforter.
I know the SP500 is perilously close to its 200MA. I know the last time it touched this lighting rod was May 27th, 2016. I know this may all feel like there is a PA system that just announced you are on a game show and the results could be a grisly death.
Let me reassure you it is not
This is what markets do. They go up. They go down. We have bull markets. We have bear markets. We’ve become immune to markets actually reacting to political events. This is quite normal my friends.
I’ve been saying for over a year now:
- Reason for the 2000 bear market was Greenspan sopping up Y2K money
- Reason for the 2008 bear market was housing bubble bursting
- Reason for the next bear market was – I didn’t know
I now know.
Who would have thought?
A self-inflicted bear market.
I don’t have to remind you of the value of having a plan in the face of all this
I know you will come to appreciate the plan you have in place during the next little while because I believe this volatility is just beginning. The market we experienced last year was an anomaly. I’ve been trading for almost 20 years now and I have never seen a market that batted away a brush with nuclear war, an investigation into possible election tampering by a foreign power, and just Plain Jane weird events away like a horse whips a fly off its butt with its tail.
But it looks like the one thing it cannot whip away is the horsefly called a trade war or, at least, the possibility of a trade war.
We’re the Plan in “Plan your Trade and Trade your Plan” – TraderJanie
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