By: Spencer Israel
There is a quote widely attributed to Vladimir Lenin: “There are decades where nothing happens, and there are weeks where decades happen.”
Last week was one of those weeks where decades happened.
Near-unprecedented volatility in stocks, a historic move in oil, and the total shutdowns of major industries global economies have put everybody on edge as the COVID-19 virus continues to spread.
As Portfolio Manager and blogger Eddy Elfenbein noted on Friday, “Of the last 10 years, this week the S&P 500 posted its:
That kind of whipsaw action in the market is nearly unheard of.
As a microcosm of the craziness, look no further than Friday’s close. Buoyed by a speech in which President Trump declared a National Emergency and touted the assistance of the private sector in helping to fight the pandemic, major indexes posted their largest single-day point gains in 12 years.
And yet by Sunday night, most of that optimism had vanished. An emergency decision by the Federal Reserve to lower interest rates to 0-0.25% and restart Quantitative Easing for the first time since the financial crisis sent a shock through markets. The S&P futures hit limit down just 14 minutes into the overnight session, erasing most of Friday’s gains in one fell swoop.
Where Does This Leave Us?
According to FactSet, the sell-off in stocks over the past few weeks has brought the S&P 500 forward P/E ratio to 14, the lowest it’s been since December 24, 2018 (readings below the historical average of 15 are extremely rare).
We are in a bear market now. This marks just the 13th time since the end of World War II that sentence can be said.
And there’s no way of knowing just how long this could last. In the previous 12 bear markets since WWII—defined as a period in which stocks fell more than 20% from their highs—the average length was 14 months.
If the projections are correct—and they’re virtually certain to be at least partially right—things are almost certainly going to get worse before they get better. That is as much true for the containment of COVID-19 as it is for economic conditions.
This leaves investors in the vulnerable position of trusting that things will get better, without knowing exactly when that could happen.
Jason Zweig put it nicely in his column on Friday: “Investing, now more than ever, is about controlling the controllable. You can’t control the markets. You can’t control the coronavirus. You can control your own behavior, although that requires making accurate, honest predictions about yourself.”
In a normal situation, you could say that we’ll never see a week like last week again. But these are unprecedented times. As crazy as the second week of March 2020 was, there’s a high probability that the coming weeks will be even crazier.
All we can really do is ride out this storm. Expect the unexpected. Be kind to your neighbor. And above all, stay safe. We’ll get through this.
Active Trading with Lightspeed
Lightspeed, a division of Lime Brokerage, provides professional traders with all the tools required to help them find success in stock trading, and we have been developing and honing our active trader platform to offer an optimal user experience. With the intuitive interface layouts and institutional quality stock and options scanners, we aim to help traders reach their goals, no matter what their strategy is. We also offer our clients some of the lowest trading fees in the industry.
Lightspeed Financial Services Group LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer nor recommend any of the services or commentary provided by any of the market commentators/educators or service providers and any information used to execute any trading strategies are solely based on the independent analysis of the user.
Copyright © 2001-2021, Lightspeed, LLC. All Rights Reserved.