What to Keep in Mind About Today's Big Sell-Off
Another day, another big reversal... Why is the market falling?... What to keep in mind about today's big sell-off... A note from Porter... Tonight's special event is about to kick off...
After a shaky start to the year, the broad U.S. markets had been relatively calm for the past several months...
But no more... Over the past few weeks, volatility has returned with a vengeance. After months without so much as a 2% decline, we've now seen stocks swing several percent – up and down – every day this week.
Again, we expect this to continue... As Steve Sjuggerud has explained, even under his most bullish "Melt Up" scenario, we're likely to see several more days and weeks like this along the way.
Whenever stocks remind us they can go down as well as up, we typically get one question more than any other...
"Why is the market falling?"
Many folks – typically those who are new to investing – seem to believe that if they can just figure out what "caused" the market to fall on any given day, they'll eventually be able to avoid market corrections altogether.
Of course, if you've been with us for long, you know these folks are always disappointed...
You see, as legendary value investor Ben Graham liked to say, in the long run the market is a weighing machine... But in the short run, it's a voting machine.
In other words, over long periods of time, the market's performance is based on logic and reason. Stocks move up or down based on quantitative data like fundamentals – how the actual companies behind them are doing – and the relative value of other assets.
But in the short run, the market's performance is based largely on emotion. This means there's no way to know exactly how the market will react to the news on any given day. Worse, it's often not even clear what news the market is reacting to in the first place.
Occasionally, there may appear to be a single reason for the market's moves. Sometimes, there's no news at all. Often, you could point to countless potential causes.
The latter is certainly the case right now...
As our colleague Scott Garliss noted in the Stansberry NewsWire this morning, emotional investors aren't lacking for reasons to worry today...
The broader market averages are all lower today... There is no one defined reason why, but rather a number of things going on. They are as follows:
- Earnings in general weren't great. Texas Instruments (TXN) is weighing on Technology. This is the biggest week of earnings this quarter.
- Saudi Arabia's crown prince says he is taking all legal measures in the Khashoggi case. This is creating additional concerns around technology funding, as the Saudis are big backers.
- Ongoing Brexit uncertainty – talks have stalled around the Irish border.
- China boosting stimulus is stoking speculation that the economy is faring worse than the government is letting on.
- Italy's interior minister saying Italy has no plans to change its budget proposal (this is after the EU rejected the budget and gave it three weeks to respond).
- German election concerns – The state of Hesse has elections on Sunday and polls indicate Merkel's CDU party could see one of its worst results in the region ever. This is on top of its sister party, the CSU, having its worst turnout since World War II in Bavaria last week (CDU can't run there and CSU can't run in the other 15 states).
- Robert Kaplan, president of the Dallas Federal Reserve, saying fiscal stimulus (lower taxes) could boost the Fed's short-term neutral rate. That's boosting the dollar and weighing on stocks.
- Asset managers hedging bets ahead of U.S. midterms on November 6.
But it's important to keep a few things in mind here...
First, as Scott noted, none of this "news" is new. The market has known about all of these problems for some time, which means it has likely already discounted them.
More important, none of these "reasons" have altered the longer-term picture to date. For now, the most reliable measures of economic, stock market, and credit market health continue to tell us the risks of a true bear market or recession remain low today. This suggests these concerns – like countless others over the last nine years – will eventually pass, and the bull market will resume.
Stay long, but stay smart... and keep a close eye on your trailing stops, just in case.
For the rest of today's Digest, we're turning things over to Porter, who has a short note about tonight's special 'Melt Up' event...
Tonight, we're airing the biggest event in Stansberry Research history. And the best investor in the world is hosting it.
No, I (Porter) am not exaggerating.
There isn't a better investor anywhere in the world than my lifelong friend and business partner, Steve Sjuggerud.
If you've been reading our work for any length of time, you've probably already figured this out for yourself. If you don't know Steve yet, I'll show you in just a second exactly how I know this is true.
Now... Why should you care about any of this?
Because after the Dow dropped more than 600 points today, it's more important than ever that you get the right information. We are at a critical moment right now.
And tonight at 8 p.m. Eastern time, Steve is going to answer the two biggest questions on every investor's mind:
- What's going to happen in the financial markets over the next year?
- And exactly where should you put your money today?
I know what you're thinking... "Everyone and his mother has an opinion on where the markets are headed. Why should I listen to Steve?"
The answer is simple... Because no other analyst out there has accurately called so many major market moves since 1999. From his call of the market top in early 2000... to his call of the bottom in early 2009... to his spot-on predictions about gold, real estate, biotech, China, and many more – no one has done a better job over the past 20 years of identifying the market's biggest and most important moves.
The numbers prove it...
We looked at the data earlier this year while compiling our annual Report Cards, and Steve's returns continue to blow us away.
As you probably know, few investment firms are able to beat the S&P 500's returns over long periods (like five to 10 years). But since launching True Wealth Systems in early 2011, Steve's average annualized return is 26%. That's nearly double the S&P 500's annual return in the period.
Virtually no one who has been investing in large-cap, long-only, liquid equities can match these results over this period.
If you have any money in the markets right now – or plan on investing after the recent pullback – you'd be a fool to do it without hearing from Steve first.
The best part is, tonight's event is totally free of charge...
Starting at 8 p.m. Eastern time, Steve will explain exactly which sectors you should be looking at right now... when to invest... and reveal the details on one little-known stock that he thinks could soar by as much as 1,000% in the coming year.
Again, this is completely free, just for showing up.
Plus, if you decide you'd like to try Steve's paid research, you'll find the best deal we've ever offered for his work... But only if you show up for tonight's event. Try to log in a few minutes before 8 p.m. to test your sound and connection – we're expecting more than 110,000 people.
To reserve your spot, simply click here.
One final note...
Yesterday, I came across an incredible statistic from our friend Jason Goepfert, who runs the excellent SentimenTrader website.
Jason says the "dumb money" hasn't been this scared since February 2016. Two months later, the market was up nearly 15%.
When Wall Street talks about "dumb money," they're referring to retail investors... folks who aren't professionals. These folks tend to get excited about investing when it's already too late, after the market has run much higher... and they get scared during pullbacks, when it's actually a great time to buy.
Again, tonight's event starts at 8 p.m. sharp. It's totally free, and worth every minute of your time. Click here to save your spot.
New 52-week highs (as of 10/23/18): none.
In today's mailbag: One subscriber weighs in on the recent "Melt Up" skepticism, while another shares his perspective on our trailing stop loss advice. As always, send your notes to feedback@stansberryresearch.com. And if you'll be joining us for tonight's, we'd love to get your thoughts.
"Looking forward for [Wednesday's] event. It looks like the Melt up is getting more convincing because all of the [negative] comments of your subscribers (not my thinking). It looks like [the mailbag could be] a new contrarian indicator." – Paid-up subscriber Mauricio M.
"In response to John K.'s question on stops, I've also hit a handful of my stops and believed the stocks will still soar with the Melt Up. [But I] chose to sell per my stops. I need to follow MY trading plan because I need to stick to my risk management – even if my plan from the onset was to have a different stop than the recommending letter.
"A little disappointed with some of the stops, but having that 'dry powder' during these fantastic buying opportunities and knowing I'm covering my downside have kept a smile on my face these past couple of weeks." – Paid-up subscriber Jeff S.
Regards,
Justin Brill and Porter Stansberry
Baltimore, Maryland
October 24, 2018