Turn on the TV, radio, or look at social media and everyone has an opinion. They may all mean well, but no one knows when this will end. The only thing that is true in every crisis I’ve been through (19 in 42 years), human nature does not change. You can measure fear. People vote with their money. Follow the money.
Source: https://money.cnn.com/data/fear-and-greed/ as of 3/30/2020
Included are three of many charts I’ve followed through the years that reflect fear and greed. The CNN chart above highlights major inflection points of greed and fear. When all indicators are at an extreme, it reflects either oversold or overbought markets. The charts show the vote. Stocks have already been sold as reflected by the chart below.
Source: Dorsey Wright Assoc. Industry Analysis as of 3/25/2020
The chart above further shows significant fear in the markets as represented by all investable industries being oversold.
How can you use this to your advantage? We are told to buy low. Hard to do when the world is in recession and COVID-19 is all around us. Here’s the plan…
Strategically: you are at a point in time when the risk/reward has drastically changed in favor of reward. Stock yields are higher now due to cheaper prices. Assets may offer better values due to cheaper prices. Logically, you understand. Emotionally, you say NO WAY.
Tactically: All the strategy in the world won’t win if you don’t employ the correct tactics. We’ve built up a cash position as a strategic reserve in our portfolios. This is the time to begin to use them. It does NOT have to be all or none. Begin to deploy the reserves by dollar cost averaging, 15-20% at a time. No one rings a bell and says it’s time to invest! Use this to your advantage.
Source: Investors Intelligence Bulls vs. Bears; published weekly. Purpose is to highlight recent periods of extreme fear inflection points.
The bulls vs. bears chart (as measured by the number of investors polled by Investors Intelligence weekly who are bullish or bearish on current market outlook) very rarely has more bears than bulls. In the few times it has, it represented a low-risk/high-return opportunity. We are at that period now as reflected by the numbers above.
We are battle-scarred veterans and recognize the next few months will be high anxiety. We take your trust and confidence in us very seriously. Teena, Heather, and I have your best interest at heart and will do all we can to help you get through this and succeed. Our team has transitioned to working from different locations in an effort to help flatten the curve, just as many of you have done. We’re available via email and our office phones have been forwarded to our cell phones. Since we cannot walk into each other’s offices to collaborate, issues will take a little longer than normal to resolve and we ask for a little bit of grace as we continue to navigate through these uncertain times.
We know this is scary, but we’ve been through many crises before. This one is no different. We WILL get through this, and we WILL succeed. Stay safe, love your loved ones, and God bless you.