Home About Archives RSS Feed

@theMarket: Expect More Volatility Ahead

By Bill Schmick
iBerkshires Columnist
As we enter the second quarter, this first week is a taste of things to come. After months of enjoying a straight-up stock market, we are getting back to the new normal, so strap on your seat belts.

Monday and Tuesday were downright ugly. The next two days we climbed back up and then on Friday gave some back. It was a roller coaster and is reminiscent of the period from May through October of last year. Imagine that.

It was a down week, despite a surprise upside earnings surprise from Alcoa, which is usually the first company to report each quarter. Further good news from some big banks failed to inspire the market, however. Once again, as I wrote last week, the rain in Spain has flooded our plain.

Spanish banks borrowed twice as much from the European Central Bank in March as they did in February amounting to $419 billion. The ever-present angst among European investors has focused on Spain this month. Next month (or week) it could be Italy, Portugal or that popular whipping boy, Greece, that's back in the news.

Underlying the recent climb in Spanish sovereign bond yields is a brewing housing crisis and a faltering economy. Spanish banks are also bleeding. They are grabbling with 300 billion euros in property loans and the Spanish government has said it isn't prepared to inject any more capital into the sector. It's the same old song that will most likely end in another bailout for Spain.

I shouldn't blame Spain for all our worries. China's slowdown has also contributed to investors' worry. The annual rate for Chinese GDP growth slowed in the first quarter to 8.1 percent from 8.9 percent. I wish our growth could be even half that rate but everything is relative. And relative, in the context of Chinese economics, equates to slower growth, slower demand for materials and commodities, and a host of other goodies that the world depends on to drive their own economies. A hard landing in China coupled with a recession in Europe would not be an auspicious development for world economic growth. Right now the state of China’s economy is muddy at best.

As for our markets, the decline I have expected has begun. Pullbacks vary. If we take a look at the last nine times the markets have declined going back to mid-2010, we see that the longest correction was 22 days. The average was 15 days. Snap-back rallies can last from two days to seven days. This week's snap-back lasted two days.

What is clear is that volatility increases substantially during times like these. My advice: do not try to trade the ups and downs. You will be left with a big hole in your portfolio and end up losing far more than the market corrects. If you had decided prior to this pullback that you were going to stick with the markets, then do so, take your lumps and look to the long term.

If you followed my advice and raised cash, it is time to be patient, watch the markets gyrate but don’t let that cash burn a hole in your pocket. Patience in this kind of environment is worth its weight in gold.
0 Comments
     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Pittsfield School Committee to Reconsider Indigenous Peoples Day
Holiday Hours: Memorial Day
Pittsfield Announces First 'Citizens Academy'
Brayton Pupils Encouraged to Remember Sacrifices
Drury Announces Third Quarter Honor Roll
Williams Appoints Directors of Financial Aid, Admission
Williamstown Rotary Club Awards Paul Harris Fellowship
Darrow School Names Top Students for Class of 2018
Attorney Judith Knight Running for Berkshire District Attorney
Main Street Hospitality Appoints General Manager of Red Lion Inn

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (259)
Independent Investor (353)
Archives:
May 2018 (7)
May 2017 (1)
April 2018 (7)
March 2018 (6)
February 2018 (7)
January 2018 (7)
December 2017 (8)
November 2017 (5)
October 2017 (5)
September 2017 (5)
July 2017 (2)
June 2017 (8)
Tags:
Congress Europe Rally Election Housing Retirement Recession Deficit Oil Pullback Jobs Markets Stimulus Economy Commodities Japan Banks Taxes Wall Street Debt Fiscal Cliff Crisis Euro Selloff Currency Debt Ceiling Federal Reserve Bailout Europe Stocks Energy Metals Greece Interest Rates Stock Market
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: Markets Are Going Higher
The Independent Investor: Does Cash Mean Currencies?
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
@theMarket: Nothing Memorable in the Markets this Week
The Independent Investor: It Is No Longer Enough to Simply Manage Money
The Independent Investor: Are Americans Saving Enough for Retirement?
@the Market: Stocks Look Ready to Reach New Highs
The Independent Investor: What's Up With Oil?
@theMarket: China Worries Dominate Markets
The Independent Investor: Financial Scams Targeted at Elderly Are Epidemic
@theMarket: Peak Earnings Versus the Yield Curve
The Independent Investor: The Opioid Effect
@theMarket: Earnings Up; Stocks, Not So Much