I tried to start off this article with: “The good news is that …,” and then I struggled to think of any good news for investors.
Maybe the fact that it’s hard to think of a silver lining after a day like Tuesday — when the Nasdaq
plunged more than 5% — is the good news. Let’s think of other positives, though, at least for a mental exercise:
Ukraine seems to be winning the war, for now. The only thing I know about this war, and every other war, is we don’t actually know what is going on, and the media isn’t much help.
A lot of stocks become compelling bargains when selloffs occur, and if you’ve been waiting for new names to add, this is a good time to start digging in on some.
Even some high-growth stocks that aren’t outright cheap are going to be much higher three to five years from now. That’s another reason to start looking for new companies and current holdings that are beaten-down.
After decades of the government and the Federal Reserve working to keep interest rates low, we are finally starting to see some normalcy in the debt markets. Governments and companies shouldn’t be able to borrow money at artificially low rates because it creates terrible distortions, bubbles, crashes and misallocation of capital. People should be able to get a return for lending money to governments and companies. That’s now happening again. Unfortunately, even with U.S. Treasury paper yielding 3%-4% and mortgage loan rates at roughly 6%, interest rates are still below natural levels.
The Space Revolution is continuing to accelerate, and in 10 years, people will be on Mars and none of them will be talking about the 5% stock market crashette day of Sept. 13, 2022.
So that’s all good.
On the other hand:
1. The economy remains in a fragile place with the kind of volatile inflation that I’ve been warning about.
2. The stock market isn’t extremely oversold or wildly undervalued.
3. Estimates for earnings are still sticky and probably too high.
4. There’s still a consensus of a soft-landing and a new Kickoff Bubble-Blowing Bull Market — and that consensus will probably turn out to be wrong.
5. Most analysts still believe the Fed will soon pivot and somehow get back to quantitative easing. That’s not realistic.
6. I’m not sure retail investors have given up on the high-growth stocks that are down 70%-90%, and I’m not sure the markets can bottom until that happens.
7. We still need to see a bunch of SPAC stocks and other penny stocks go to zero and delist. I’m not sure the markets can bottom until that happens.
8. It’s unlikely that the economic and stock market cycles inherent to this Bubble-to-Crash economy and market paradigm that we live in will let this cycle end without more economic pain. Then again, the Kurtzweil Rate of Change that makes our current cycles go faster than ever before might mean we get to a bottom in the economy and the markets soon.
That last comment reflects a bit of good news to end this article. I’m sorry I don’t have easy answers, and I wish I could feel good about pounding the table on some stocks after the big selloff. But I can’t say that.
I will let you know when I do start getting wildly bullish again. I expect that to happen during some sort of market panic that’s even worse than Tuesday’s.
Cody Willard is a columnist for MarketWatch and editor of the Revolution Investing newsletter. Willard or his investment firm may own, or plan to own, securities mentioned in this column.