My Thoughts on the Latest Stock Market Downtrend

My Thoughts on the Latest Stock Market Downtrend

Market Correction, Crash or Consolidation?

Here’s the deal… what’s happening to the stock market in March 2021 is very reminiscent of one year ago in March 2020. It was scary, stocks were tumbling amidst a huge sell-off. And last year the stock market had shutdown a few times! Now THAT’s scary!

But this latest market correction, if you will, is pretty scary potentially, because this is more of a tech sell-off. Some really great companies like AAPL and MSFT and TSLA are going down. But that’s the thing. These are great companies and Apple, Inc. is still the most valuable company in the world based on marketcap.

My logic tells me to hold on and don’t sell. These stocks are going to rebound and once they do they will surpass their all-time highs… if you sell it’ll be like starting over. I’m thinking of the value investor who bought AAPL a long time ago at around $20 dollars and is now sitting on a pile of money. Dreams can happen. Patience and fortitude are of the utmost importance.

Stay-at-Home Stocks?

Stocks that also took a major hit were all the stay-at-home or pandemic stocks. Like Zoom (ZM), Teladoc Health (TDOC), and even Amazon (AMZN).

I’m up in the air over these stocks since I’ve invested in quite a few. And now that many States are lifting quarantine and lockdown mandates because many are getting the covid vaccine, who’s to say how these stocks will do in the near future. I’ve taken a little bit off the top of these stocks just in case.

The Stock Market Has Always Gone Up

Truth be told, the stock market as a whole has always gone up. Historically, that is the truth. Sure, we’ve had a Great Depression and a Great Recession, but we’ve survived those even though they may have taken a few years to recover.

We recovered from last year’s Market Crash. At least I did in spades. My portfolios had hit all-time highs in February just before this market correction hit. Which brings up a good point. Many times when the markets hit all-time highs there is going to be some consolidation and a market correction especially when the markets have gotten a bit ahead of itself.

Many times, it’s just good to not look at the stock market every day. Warren Buffett has said he checks the stock market once every 2 weeks. He doesn’t follow the day-to-day fluctuations like day and swing traders do. As a matter of fact, this week I’ve halted all day trading activity, until I see that the markets get a hold of themselves. A fisherman sometimes gives up some slack and lets the fish go a bit before reeling it in again. Same principle strategy.

Making Sure We’ve Hit Rockbottom

Investors and traders alike will tell you to ‘buy the freakin’ dip’… BTFD. But, in these downtrends, there can be false bottoms, and we sink even further down.

We really need to establish what rockbottom is, and when to start buying stocks at bargain basement prices. And that’s where our knowledge of technical analysis comes into play, and our ability to read the charts and indicators.

We simply have to wait until there is a solid uptrend again before buying stocks at bargain prices.

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randomguru

Portfolio Manager & Musician

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