Well, that was ugly…

Last week’s markets opted to apex into a nadir, so to speak.

Was it the end of the world? Is the rally over? Are we into new lows? Will the, "See, I told you so” mob seethe in short-term smarm and shout from the rooftops that, “The end is nigher than nigh”?

Methinks before we go hide in the bomb shelters (again) I’ve got a couple of suggestions…though I’m now sure staring to wish I hadn’t suggested we need a pullback the other day…

As the summer haze unfolds and volumes dwindle the importance of steady, patient, and disciplined behaviour can’t be understated.

All these rapid fear resets along the way will prove very valuable for long-term investors, even if it feels a bit painful in the short-term.

Here’s a Thought

Imagine that it’s mid-Summer last year. The impeachment process is rolling towards Trump, Russia spy-gate and Mueller team are all hard at work to drive mass social media angst and hatred.

The idea of a global pandemic, complete economic shutdown, and riots in the streets were nowhere to be found. And the thought of kids taking over six blocks in downtown Seattle and making their own new country was a chapter out of a Terry Pratchett novel.

So, had I told you some random afternoon last June 2019 that all of this would unfold in 2020 - where would you have guessed the S&P 500 would stand as of yesterday?

(Think carefully now and be honest.)

Would your answer have been: "Uh, pretty much where it is now...”

Not on your life...

All the horribles of the last 90 days have taken us – from a stock market context - exactly nowhere in a year.

Yet the world is once again ready for their bomb-shelters as a volatile day explodes onto the scene.  

And there will be more as the future unfolds.

The virus will pass. Science will win. Technology will change the world. Rates will stay low for so long that we’ll see deflation as a kind of monster-in-residence. 

Ask Yourself This Next…

I cannot stand to see hard work and patience in the near-term end with painful days like we did at the end of last week.

And thought I like it even less than you do, perspective helps ease that pain:

Sentiment in the Tank

If you follow the money, you’ll find that it’s terrified.  

TD Ameritrade said last week on CNBC that their average account has "roughly 35% in cash."

Now take a guess when they will feel good again?  

Answer: Only once we’re way above the new highs…way above!

We not only still have more bears than bulls - but the 8-week average of the poor sentiment is now reaching levels that rarely last very long. 

The snapshot below is the current read of the AAII Bullish sentiment on an 8-week moving average.

It shows that 70% are not bullish.

Just wait until you see what happens when the FDA states "we have approved a successful vaccine for the virus...."

As the summer rolls on and we peer into Fall, and then into 2021 and beyond, the New Economy will muster up these words more and more: "better than expected."

And choppy will be good, as we don't want to see everything go straight up.

You'd rather have a few rocky spots along the path. That’s what shakes the weak hands from trees and creates value.