I hope you had a better Thanksgiving than the markets did…
The S&P 500, Dow Jones, and Nasdaq fell 3.8%, 4.4%, and 4.3% respectively Thanksgiving week. The drop erased market gains on the year for the Dow and S&P, while the Nasdaq clings to a 0.5% return year to date as of Black Friday.
Markets move… both up and down. Corrections are normal. But the sharp correction we’ve seen over the last two months reinforces that volatility is the new normal.
No one likes to see the value of their portfolio go down. But volatility gives us opportunities…
What’s causing the pullback in stocks? In a word… uncertainty.
- The on-again, off-again talks between the U.S. and China over trade policy continue to whipsaw the markets. (Prepare for more of these headlines as President Trump plans to meet with President Xi Jinping at the G20 meeting—which kicks off today.)
- The price of oil collapsed on reports of supply outpacing demand next year, stoking fears of a slowdown in the global economy.
- The Federal Reserve seems hellbent on raising rates this December—something that may continue into next year.
- Rising interest rates… combined with the Fed unwinding its quantitative easing (QE) program… are driving fears that rates will rise too fast and pull the economy into a recession.
This may or may not be the beginning of a bear market. But I do recommend preparing your portfolio for more volatility…
Take the time to reevaluate the strength of the thesis behind each of your positions. Think about locking in some winners and keeping some “dry powder.” This will allow you to take advantage of opportunities if prices move lower.
With the recent pullback, I’m finding lots of great ideas for my subscribers. Incredible companies have been sold off with the entire market. And we’ve been able to scoop up a few of these names for dirt-cheap prices.
I’ve also recommended adding to some of our existing positions… including Square (SQ)… one of the best growth companies in the tech industry. After my initial recommendation to Curzio Research Advisory subscribers earlier this year, shares of the payment processor rocketed higher. But the recent selloff is overdone for this high growth name. It’s growing revenues at over 40% per year and shows no signs of slowing down.
You can also profit as stocks fall. Our resident short selling expert, Mike Alkin, editor of Moneyflow Trader, follows an elite yet simple strategy in his investment advisory—which both limits risk and offers great returns.
And look at what a difference a year makes…
According to Deutsche Bank, from January of this year through mid-November, of the 70 assets it tracks, 90% have negative returns on a dollar-adjusted basis.
Last year, only 1 out of 72 assets tracked by the bank had a negative return on a dollar-adjusted basis.
2017 was one of the least volatile years in the markets. But going forward, prepare yourself for a rocky ride.
Note: If recent volatility is making you nervous, you may be taking on too much risk. To learn more about how in-house contrarian Mike Alkin helps investors hedge their risk—and profit from volatility—click here.