Panic or stay the course?
As of today, the market indices are on track for the worst month in quite some time. Let’s look at the old “glass half empty or half full” cliché.
The Dow Jones Industrial Average (DJIA) and S&P 500 are on track for their worst month since October 2010. But at the end of that month, the DJIA was at 11118.49 versus 24583.42 as of today’s close. The S&P 500 closed October 2010 at 1183.26 and closed today at 2656.10.
This is the worst month for the Nasdaq Composite since August 2011, but it closed then at 2576.11 and ended today at 7108.40.
So, the point is obvious. Emotional decisions during times like this have always created a huge loss of opportunity over time. Market drawdowns are a normal process of a bull market. It is never fun, but important to remember, the average length of time for a full recovery is fairly short. In other words, stay the course. Be patient or ignore it if you have to, but do not panic.
There is not the type of excess that creates bear markets. In fact, the Price to Earnings Ratio (P/E) as of today, is even less then the historical average while corporate earnings continue to grow. Interest rates? The last time the 10-year U.S. Treasury was over 6%, or twice where it is today, the market was still valued about the same P/E it is now.
Yes, the glass is half full. Stay the course. Remember, Warren Buffet said to be greedy only when others are fearful.