Global Stock Rout - Why? And What to do?

October 03, 2019

 

So right now, this week we're seeing a bit of a global stock rout. In fact this week the S&P 500's down 2% and with Brexit approaching that British FTSE 100 is down 3%. So what's going on? And what can we do about it? Brexit's approaching October 31st and that doesn't look like there's any kind of a plan for that event. In the United States, we're seeing a slowing job growth, we're seeing manufacturing weakness, and we're seeing the service sector slowing also.

 

West Texas Intermediate, is now $52 a barrel. The 10-year T-bill yield is below 1.6%. Who would have thought you'd see a 10-year bond yielding less than 1.6%? It does look like bonds have priced in the risks that exist in the world today a little bit ahead of equities, and there is a lot of global geopolitical uncertainty. In the first nine months of 2019 the herd really got to enjoy quite a rally. In fact, it's uncanny given the market hit and the subsequent valuations at the end of 2018. It's interesting to me how quickly people forget how afraid they were just 10 months ago. How quickly people forget the risk in equities.

 

In late 2018 many of our clients wanted out of the market. But anybody who got out missed that one heck of a rally this year. And there's a message here. There's a point: timing markets is a fool's errand. It's very easy to sell market timing, but it's very hard to execute. And why is it that those companies out there, the fishers of the world are really selling snake oil? Because, one, you've got a time the exit. Very few people got November right last year. But two - much more important - you've got a time the reentry, and almost no one gets that right. And unless you get both of those right, your best bet is to stay in through thick and thin. But how do you do that?

 

What do you do if that's your option? And modern portfolio theory is not new, it's tried, tested and researched. You have to have an asset allocation that matches your risk profile and rebalance when market moves occur. This is very much the story of the tortoise and the hare. You could be the hare and you can get run down by a truck. Or you could be the tortoise and win in the end. We wish you the best of investing success.

 

https://www.ft.com/content/3c82d9b0-e527-11e9-9743-db5a370481bc

 

https://www.bloomberg.com/news/articles/2019-10-01/stocks-in-asia-to-slide-as-u-s-data-disappoints-markets-wrap?srnd=premium

 

Related Links:

 

The Importance of Diversification

 

No Time to Panic!

 

5 Tips for When the Markets Get Rocky

 

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