I need to come with a blog to give you my take on the current market. The market tanked big time at the first signs of the current pandemic. Investors panicked and sold out big time as economies closed and GDP forecasts were dramatically reduced
In February and March the Nasdaq sold down 30% and we had several days the market plunged around 9%. In my February blog I somewhat foresaw a market correction but nowhere near the plunge we had. My reasoning in February sometimes markets correct post earnings seasons.
Here a chart of the Nasdaq the last year. As some investors expected a correction in February after a months long rally. Something the surge in the gold price somewhat suggested. No one were expecting the market we actually got a collapse in the market.
I was asked on Twitter in March about what to do in the market. The question was asked by one of my followers. I answered the most likely market was a bounce. I did not foresee the magnitude of the bounce we have had but the timing was great.
The market has bounced more than 50% since the bottom in March and momentum investors have thrived. If you ask yourself what to do in such a market my answer would be to ride the bull as long the momentum is there. The time to sell when the market tank again.
Followers have asked me lately if the the time to sell is now. I have answered to be cautious now post earnings. My calculations show there is a 60% chance of a bigger or smaller sell off post earnings(2015-2019).
In prior blogs I have given you my take on the correlation between GDP growth and market rallies. I have suggested markets to rally under good GDP conditions. What now, the US GDP plunged more than 30% the last quarter and the markets shine. The answer is the central banks’ printing of money and their zero interest rates regimes. These policies are undertaken to stimulate the economy and as the Nasdaq chart above shows the market is rallying big time. These policies are to bring the economy back to its normal self.
To summarize what to do, ride the bull till there is certain signs of a sell off. This strategy been wise for quite a while.