Trying to navigate the stock market on any given day is like trying to herd a bunch of wet cats. Investors are fickle creatures and the smallest whiff of controversy or change seems to ignite a selling panic that floods the stock market one day, with a buying spree reversal the next day. It’s a vicious cycle that replays over and over again.
The beginning of September is no different. In fact, according to the Stock Traders Almanac, September is generally the worst performing month of the year for the S&P 500 and the Dow, going back to 1950. It’s been the worst trading month for the Nasdaq, going back to 1971. So, it makes sense if you are watching tech stocks lead the market averages lower and you’re listening to the talking heads on TV talk about how we are heading in “crash” season for the year. It even makes sense if you are not sure what to believe and who to listen to and you’re finding yourself thinking you’d better cash in and hunker down and wait for the crash season to toss you to and fro like a hurricane. But we’re here to try to calm the storm and put the breaks on your emergency escape plan, even if stocks have taken a tumble.
In fact, when stocks are tumbling, it’s usually a great opportunity to buy. The old adage of “buy the dips” is a great one and usually pretty good advice if you know what to look for. You don’t necessarily want to buy the dips when the stocks are down, because what if you happen to buy into a stock that’s quickly losing value and is only going down? A better method is to watch the stocks dip and be patient for a minute to see if the stocks find their support level and you can identify a confirmed reversal. It’s normal for stocks to go up and down and then up and down again. You want to buy the stock once it’s hit its bottom support level and then starts to climb again- that way you know you are not buying into a stock that is only going in one direction. Food for thought.
We are not so pessimistic about the market at the moment. One bad day doesn’t make a trend and there is still plenty of time for the market to make some great gains before the end of the year. If you believe anything Warren Buffet has ever said (and let’s be honest- he’s pretty much an investing God), he usually takes the contrarian view of most investors. When everyone is piling their money into the market, he’s usually selling and getting out. When everyone is on a selling spree, he sees it as the perfect opportunity to pick up amazing stocks at rock bottom prices. To put it another way, if everyone else jumps off a cliff, back away from the cliff.
We looked at some of the headlines lately and thought we’d pass along some of the tidbits that everyone else is talking about. It looks like Amazon is now the second company in the entire world that has surpassed $1 trillion dollars in market value. No easy feat for sure. The first company to do it was Apple and that was only a month ago. What’s interesting is that more than half of Amazon’s trillion-dollar market cap has come in the last year. Who says you can’t make amazing gains in a year? Yeah, Amazon just shut down that argument for good. Granted, the recent sell-off has dropped Amazon’s stock a little, but once the market bounces back, they will cross that one trillion-dollar threshold again and we can party all over again.
Speaking of sell-offs, a few days ago average investors were not prepared for the sell-off in equities. Even the exchanges themselves were caught off guard, which shows us that everyone got used to the trading market we saw last month, which was smooth, moving in an upward trend and lulling average investors into a false sense of security. The screenshot below was taken from Twitter and caused us to chuckle a bit:
It’s funny because it’s true. Rest assured, today’s market conditions are not necessarily indicative of tomorrow’s conditions. Put your head down to the grindstone and keep grinding it out because if there is one thing that the stock market has ever taught us, it’s that what goes up, must come down and what goes down, will eventually go up again (in most cases). Keep your eye on the prize and the bigger picture. It will all be okay in the end.
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