All the Bad News Is Not Deterring the “Buy the Dip” Retail Equity Investor
Some investors are looking at life once the war ends — and the historical record is bullish!
Key Takeaways
Resilience Isn’t What It Seems: With respect to the U.S. consumer, just a little bit of news on why there is much less “resilience” than meets the eye. First, the Fed Beige Book released yesterday downgraded the consumer spending picture. Second, a must-read of the day goes to the Wall Street Journal, which showed that a record share of workers is tapping their fat 401(k)’s to meet their bills (More Workers Raid Their 401(k) Savings).
Investors Can’t Quit the Dip: Despite the fact that the S&P 500 has been in a holding pattern since late October, the “buy-any-dip” mentality has merely become all the more ingrained. Indeed, individual investors plowed +$2.2 billion into stocks and equity-based ETFs on Monday, even as the market tanked, and that “buying-the-dip” action was sustained into Tuesday as well (which helped the afternoon recovery during that session).
Portfolio Positioning Beyond the War: Then again, perhaps investors are looking across the valley. As I get asked about how to position portfolios during a wartime scenario, my response beyond short-term tactical trading is how to be positioned once the Iranian regime is de-fanged from a military standpoint. I am now planning ahead for what life will look like once this war against Iran ends, because this war will end. The history lesson of what happens in the year after a major war ends, all seven of them since WWII, is that the stock market was up a year out 100% of the time and by an average of +20%.
