Market Weakness – How to Play It
By Randy Williams Gurian on September 25, 2023
Market Weakness – How to Play It
I have been through many negative markets during my career, ones that experience selling pressure or weakness almost daily. Unless I have missed something, I don’t see this round of selling pressure leading to another bear market. I remain convinced that a new bull market started back in October of last year and we had one heck of a rally until August, with the NASDAQ gaining over 30%, and as of yesterday, the NASDAQ is still up over 25% year to date. The point is, Mr. Market wants you to think the tech rally is over and stocks will decline indefinitely because the world is going to end. We see it differently. We use market weakness to add to client positions. Stocks or certain asset classes are on sale, and we can add the ones we like most to your portfolio, assuming they match your risk tolerance and are a good fit for you.
Even with this recent market decline, I still believe that the nice rally on the NASDAQ won’t be undone by this sell-off, and I think the markets will find a turning point in the not-too-distant future. Certainly the Fed didn’t help matters when they said they see one more rate hike before year-end and think rates will need to be higher for longer. I think rates are too high already and are hurting the average consumer and slowing the U.S. economy. I also think if the Fed leaves rates higher for longer, the economy will have trouble and they will be forced to lower interest rates quickly. The Fed is playing a very conservative game, which is their style, and once they realize they blew it, they will have to quickly unwind their rate hikes and stocks will rally.
There is an estimated $5 trillion in money markets, short-term notes, and CDs. Most of that money will eventually make it back into the equity markets but probably after missing the next leg of the rally. Those investors are resistant to buy today because they fear the market will go lower. Once the market rallies, they will want to come back, which is how it works. I have seen it repeatedly, and so has Mr. Market.
Speaking of the next leg of the rally, the Mariners have 10 games left, and 3 teams are fighting it out for 2 playoff spots. This final stretch has an atmosphere of playoff baseball, with fans filling stadiums and cheering till they’re hoarse. We play the Rangers and the Astros, who are also competing for the final 2 spots. The M’s have the second-best record in the American League since the All-Star break, behind Baltimore. They also have the best starting rotation of the three teams and the best bullpen. The Rangers and the Astros will score runs, but so will the Mariners. To think we were in first place a few short weeks ago, then slumped, and are now rallying, sure resembles the stock market lately. Go Mariners, and enjoy the ride.