Some are saying “the 60/40 portfolio is dead.” This is another way of saying that diversifying into fixed income to reduce portfolio volatility doesn’t work anymore, even though it’s always worked in the past.
“This time it’s different.” It’s the phrase investors use to rationalize why they are bailing out of stocks.
Disciplined investors view a bear market as a great opportunity to invest available cash into stocks trading at deep discounts. But those who fled the market in early 2020 struggled with staying disciplined. Their fears, emotions, and worries about a very uncertain world got the best of them. These same investors are likely not viewing the current stock sell-off as a buying opportunity. As we like to say, “Math is math” and perhaps it really is an opportunity for many of us given these lower prices.
If you want to see, perhaps even enjoy, an exercise in futility, run a search in Google on this phrase:
It is a wry and wise way of turning the conventional wisdom about what to do in bear markets on its head. When panic grips the stock market – as it did in February and March of this year – the gut instinct of investors is to do something.
On February 12, the Dow Jones Industrial Average closed at an all-time high of 29,551. At that time, the economy was humming, corporate earnings were rising and unemployment was at lows last seen during the mid-1950s.
It seems investor sentiment has quickly changed since the beginning of the year, not to mention from just about 10 days ago as witnessed by the recent stock market decline. Many argue "why" this has happened and here's a quick look at the potential reasons:
It was in this letter exactly a year ago that we sought to provide some perspective about the steep decline stocks had just experienced in the fourth quarter of 2018.