Stocks slammed by 'chain reaction' — here's what pros are saying

Yahoo Finance ^ | May 19, 2022 | Brian Sozzi

[lasereye]

Horror has returned to Wall Street trading desks and the portfolios of the average investor.

"Wednesday's sell-off really seems like a chain reaction, with the weakness in retailers feeding into fears that the consumer may be slowing, that inflation remains a problem, that inventories are too high, and this could pressure profit margins," Truist co-chief investment officer Keith Lerner told Yahoo Finance. "When you have such household names moving down so much, this spooked the broader market."

Lerner has been warning of a downturn in markets for months, downgrading his view on stocks back in April. The call looks prescient.

Here's what pros are telling us about the renewed market pressure:

• Walmart and Target earnings misses = the possible start of a material consumer spending pullback

• The S&P 500 closing under 4,000 is unwelcome for trading algorithms

• No signs of peak inflation = tougher Federal Reserve on interest rates

• Worries about more hedge fund forced selling (see news of embattled hedge fun Melvin Capital closing shop)

The big question among market participants is whether the bearish activity in the markets the past two days represents capitulation. Such a happening in the markets is when all of the selling activity is exhausted as speculators are forced out of the fray. In turn, that brings out fresh buyers that are looking for attractive values.

The general vibe on the Street is that more selling is on the way in the near-term.

"No, not yet I’m afraid," Interactive Brokers strategist Steve Sosnick told Yahoo Finance on whether we have capitulation. "We got a 10:1 down/up volume day, but neither 10:1 advance/declines nor a VIX in the high 30’s. On top of it, our customers have been resolute net buyers of their favorite stocks. Until/unless I see that change, we haven’t seen capitulation.

[Mr. Jeeves]

What, in your opinion is the best investment for $100,000 right now. Just keep it in cash?

1) Start buying some gold. Not all at once, keep cash ready - despite the inflation rate. The dollar is showing absurd strength right now, which won't last forever. 10% is a good insurance level.

2) Residential real estate is still OK - not nearly as overpriced as the media likes to pretend - but it varies based on individual markets. We are five million units short of meeting demand, as due to NIMBYism and looting politicians builders can no longer develop starter home communities at a profit. Sell California - buy Oklahoma.

3) After interest rates peak, some bonds will become very attractive.

4) For now, avoid stocks or other forms of paper investment that will make your advisors rich, as it is too difficult for the average investor to discover their true value.

5) But the very best way to invest $100,000, IMHO, is in one's own business - or if one doesn't own a business, in non-university education related to your field of choice.

This is the kind of market where you can do everything "right" and still lose money in the short run. The point is to avoid big wipeouts, as are in progress at some former NASDAQ high-flyers right now. Look for real assets with real long-term value.

[refreshed]

Thankfully, he is pretty well set in this area. Any more guns and he’d be a gun store. Good advice.

[refreshed]

He just wants it to sit. He doesn’t really have the acumen to play a market or anything like that. He would like a good return in the 3-5 year window if possible. He is retired and anything beyond the 10 year window is probably not his greatest concern. Thanks for the advice.

[gitmo]

There’s a really big sale on stocks down on Wall Street.

[Pollard]

Same timing though. Inauguration.

[cschroe]

Use $10k o fit to buy I-Bonds. If realtive is married, use another $10k to buy I-bonds in wife’s name. I-Bonds issued this month are at 9.7% interest until next adjustment and fully guaranteed. Only gotta hold them a year.

[CIB-173RDABN]

New rules - collapse the systems to collapse the USA. Been the commies’ plan for decades.

---

And it was working, as long as they went about it slowly letting everyone getting used to it.

But now they have thrown caution to the wind and are going all out with their agenda, what changed?

My opinion is that the frogs have began to feel the water getting hot and are trying to jump out of the pot (shift towards the right).

The Democrats are now at the peak of their power but they only have a few more months to do damage and they will be swept away (yeah I know many here on FR are pessimistic but history is has shown nothing stays the same and even the most oppressed people will force change when their lives become unbearable.)

I expect the Democrats will soon be getting more desperate in their words and actions as we get closer to the mid-terms.

[Flavious_Maximus]

“...These evil b#stards are going to try everything to hold onto power...”

In the same way they goaded Putin to invade Ukraine, they are going to goad Putin into using tactical nuclear weapons. THEY ACTUALLY WANT NUCLEAR WAR! They think they will survive it after 95% of the worlds population is dead. This is what Bill Gates said, “We need a world population of only 500 million”.

The coup plotters know that their very lives are on the chopping block. Nuremburg II Trials are coming and the propaganda media members (looking at you Banjo-Boy) are going to be on the stand wearing leg irons.

[refreshed]

Thank you for that sound advice. Lots to consider.

[Jane Long]

Who was this finance show ‘guy’? Cramer?

He’s been repeatedly wrong.

:-)

[DuncanWaring]

The ‘29 crash took a quarter-century to recover.

[1Old Pro]

The ‘29 crash took a quarter-century to recover.

This one will llast until Trump is elected in 2024.

[Justa]

My investments are in Brazilian stocks. They QT-d and rose interest rates years ago.

[reintarnation]

Please remember.......
If you don’t sell, you don’t lose.

Sage advice.

[blackdog]

If by chain reaction they mean Joe Biden, well then yes.

[blackdog]

MM401KGA.

-Make my 401K great again.

[hardspunned]

You’re talking to a 35 year Teamster here. I paid $15,376 in union dues. I know what a tool leadership was for left. I know where my money went. What I’m saying is the independent, with his limited resources, is the first to be bankrupt. It will also hammer union shops. Corporate trucking will see closures too.

[JesusIsLord]

The market goes up and the market goes down.

Some things to consider when the market is in recession according to https://www.investopedia.com:

1. Downturns Tend to be Followed by Upturns. The decline of the asset's value is often temporary and will go back up. If the investor sells when the market is down, they will realize a loss. Research has shown that the average duration of a bear market is 1.4 years, compared with 9.1 years for the average bull market. The average decline of a bear market is 41%, while the average gain of a bull market is 480%.

2. Most Important, you can't time the market. Timing the market can be incredibly difficult, and investors who engage in market timing invariably miss some of the best days of the market. Historically, six of the ten best days in the market occur within two weeks of the ten worst days.2

3. For Long-term Investors, such as someone with a 20- or 30-year investment time horizon, the stock market crash of 2008, the market downturn after the Brexit referendum in 2016, and other dips and drops in the market are likely to have a smaller effect on the long-term performance of their portfolio, compared to someone who sells off during the downturns. That's because what's important to a long-term investor is their own investment goals and a sound investment strategy based on a well-diversified portfolio with a mix of asset classes to keep volatility in check. If you stick with your long-term investment strategy, you shouldn't let emotions like fear and greed change your course of action. If you contribute a certain amount to your portfolio each month, keep doing that! If your target allocation is 80% stocks, 20% bonds, re-allocate when stocks drop to restore your target weights at a relative discount. This advice should not apply if you are close to retirement and do not have the luxury of time to ride out periods of market volatility. In this case, however, you should already be in a more conservative portfolio as retirement approaches. The Bottom Line: Having the patience and discipline to stick with your investment strategy is vitally important in successfully managing any portfolio. And if you have a long-term investment strategy, you'll be far less likely to follow the panicking herd over the cliff. Instead of fear-based selling, use a bear market as an opportunity to buy more—accumulate shares at deep discounts in some cases and allow yourself to diversify, building a more stable base for when thing's eventually do turn around.

[Vaduz]

Note post #30

[Colinsky]

1) Start buying some gold.

Yes. Gold has never gone to zero. Everything else can go to zero.