Yesterday, we set yet another record – a gain of over 11% on all major stock indexes. It was an exhilarating rise after a weeks-long drop, but this is just one blip on the larger graph. We have no way of knowing what will happen for the rest of this week or the rest of this year, but I would be hesitant before buying like a mad man.
The Markets Are Fundamentally the Same
The problems that got us into this mess are still around. While actions are being taken by governments around the world, they’re just beginning their intervention and things aren’t going to turn around instantly. Yes, we have a glimmer of hope, but chasing hope is a desperate action.
It’s going to take some time before we find out whether the governmental action is going to work – this is certainly nothing that will happen overnight. While the new efforts are being tested and broken in, don’t be surprised if you see the market continue to drop like it did before.
Don’t Lose To “Sucker Money”
By all means, keep investing, but don’t believe for a minute that we’ve hit bottom. I have confidence that the market will turn around, I just don’t think it has yet. Nothing would make me happier than being proven wrong, but I think we have further to fall before we recover.
I heard an interesting phrase on the radio yesterday: Sucker money. After a long drop, there is usually one day where many people start guessing that the bottom has been reached and they start buying like crazy because they’re tired of seeing so much red. For that day or two, the markets will appear as though they have recovered, but the fall begins again. Those people who invested so much and still lost have been suckered out of their money by a fleeting market jump. As always, only invest what you won’t need for over five years and don’t invest anything you can’t afford to lose.
We’re Not Going To Bounce
The markets aren’t going to plummet then bounce right back with a huge gain. Unstable actions like that only cause more volatility. Instead, the market will settle to the bottom, then start easing back. 11% is fun to watch, but it’s just about as unstable as one can get in a recession. Enjoy it while it lasts, because we’re in this for the long run, now.
{ 4 trackbacks }
{ 1 comment… read it below or add one }
Great advice…stop watching CNBC, keep saving……the market losing 20% of it’s liquidity does not mean that individual investors a stupid! To the contrary. I haven’t sold a thing….I’ll make my money back!