Markets Don't Go Up In A Straight Line

Equities start the day higher as I peek ever so cautiously out of my underground bunker. I am alive, yes, though savagely distraught and depressed at the fact that I haven’t been able to write my beloved recap during such tumultuous and trying times. Between all this insane volatility and coworkers taking vacations I’ve had to trade glorious word smithing for VWAPs at 2 cents per share. But fear not my friend, there are things afoot that will bring the glory of a quirky market writer to your inbox and potentially your city much more often!! So…have we priced in the end of the world yet? Are we still fretting over growth stocks, GE, compressed valuations, and peak earnings? Yep, looks like we are, and while I’m still bullish (this if for people who might call me a flip flopper) it’s clear that this storm isn’t over just yet. What started it? Lots of things I guess:  a dumb trade war, rising rates, input costs soaring, a housing related meltdown, green bean casserole, a mediocre Nutcracker movie, “buy the dip” dying, and good old fashioned late cycle worries. What will end it? Well my friends, that’s a question that’s tough to answer, but here’s what I think: only time can end it. We need to get thru the pain like we did in 2015-2016 (which was a bear market btw). We need to watch our account balances go down. We need to watch the Fed hike and make money more costly.  We need to marvel as FAANG drops like Michigan’s football ranking. The pain you are experiencing now is WAY BETTER than the pain of a market bubble exploding. We’d rather suffer the slings and arrows of an outrageous 10-15% correction than have to relive the Dot Com collapse or the GFC. Look…this move sucks, I feel your misery, everyone around you feels your misery, but let’s have a bit of perspective shall we? The S&P500 was up 27% last year (total return) which is, you know, a lot. If we get a flat or -3% year should that really upset us? Heck if we got a -10% year then the 2yr total return is still 17%+ right? Markets don’t go up in a straight line, the pain you are feeling is how you EARN those returns on your precious capital. 

After the open we dreaded the inevitable “let’s sell this thing and see what happens” move that’s been haunting us since October. Lo and behold the market dropped from +1.4% to +0.8% within the first few hours and a sense of gloom descended upon the citizens of Whoville. AAPL continued its painful fall and midway thru the day its market cap had fallen below that of MSFT. Yep, you heard me right, the market cap of the world’s first trillion dollar company fell below its age old competitor Microsoft and is now worth roughly $823B. I don’t even have words for that, Apple has lost more in market capitalization than the bottom 33 companies in the S&P are worth combined (roughly $179B). Two letter stocks starting with the letter G had an interesting day. GE hit a new multi year low of 7.26 and GM said they are going to lay off 15k people. Yea neither of those is the kind of thing we want to see right now. Winners: NWL, WYNN, LB, TWTR, and SCG. Losers: CPB, UAL, GIS, SJM, and CMG. Luckily we shook off that gloom and by lunch traded back near the highs, 2,669 +1.4%. You guys know what time of year it is right? Yep….time to indulge in the greatest drink known to mankind. Its good its good its good… (name the movie)

In the afternoon we landed a spacecraft on Mars. That’s right, humanity landed a spacecraft on Mars while all of us worry about a 10% correction in a 300% multi year rally. Perspective….so important. “Honey I’m worried about our NVDA, I bought it at a 500 PE and it’s selling off every day”. “Go away dear, we’re doing tests on another planet that will one day lead to its colonization.” Anyway, the market managed to close near the highs and AAPL regained its ground against MSFT so today wasn’t all that bad. That being said, the pain I mentioned earlier feels like it’s going to be with us for a while. Look, there’s two kinds of bear markets: a cyclical one (like we saw in 2015-2016) and secular one (nearly always caused by a recession). I personally don’t think a recession is imminent but I know some very smart people who are starting to become concerned. So the way I see it there’s three outcomes here: The first is that we finally shrug off all this negativity and the world recovers from its malaise and this record breaking bull market continues even if it limps along. The second is that we have a cyclical bear like we saw in 2015-2016 and then we resume the long term uptrend. The last is that the market is gearing up for a recession and a start of a fresh secular bear sometime in the next few years. Keep me in camp 1 and reminding you that markets go up and down…up and down…

Final Score:  Dow +1.46%, S&P500 +1.56%, Nasdaq +2.06%, Rus2k +1.16%  

News Highlights:

 I couldn’t decide between these two so feel free to choose between them for your final laugh:

If you have the attention span of a gnat (5 secs) check out this amazing defense (really a nice analogy to being a stock buyer right now)

If you have the attention span of my 12 year old (3 mins) check out this guy almost dying.  Sweaty palms…so sweaty.

Have a good night!