In Focus: The Stock Market Crash, Part II
Thanks for checking out In Focus, our weekly look into companies or markets that made the Wall Street news cycle. This week I discuss the markets, again.
It Was All Good Just A Week Ago
Well maybe not a week ago, but it was definitely all good three months ago. While the issues that exist now did existed three months ago, the markets continued to rise. Even as analyst after analyst predicted and called for the bear market. As far back as 2015 I can remember analysts saying the market is going to drop, but the markets continued to rise, so why fall now?
Interest, Taxes, and a Slow Down
It's as simple as that, but in the reverse order. The slowing economy - see article about Jim Cramer's talk with CEOs. Then there is the additional taxes on goods created by tariffs set by the White House, and then The Fed rising interest rates. The tariffs and rising interest rates have created a major headwind for businesses, and investors know this; and this has caused investors to pull their money from the markets.
Where to Now?
The last time I spoke about the markets, it was as the markets were saddling the 200-day moving average. Now the markets have traded below the 200-day average, so I thought I should update my view. There's no way to know exactly where the markets are headed, but I think in order to get a sense of where the markets are going or could go we should look at where they've been.
Going all the way back to 2000, the Dow hit a high in January 2000 of 11,750 and due to the pressures of the dot com bubble burst and 9/11 the markets hit a low of 7,197 in October 2002, that was a 38% drop over 34 months. From the low of 2002 the market slowly labored it's way back up to 14,198, hitting that high in October 2007. Then all hell broke loose and the Dow hit 6,470 in March of 2009. The Dow wouldn't surpass 14,198 until March of 2013.
My Crystal Ball is Foggy
I've never been good at predicting markets, and using Warren Buffett and Charlie Munger as my beacons for investing, I don't attempt to predict markets. I do have areas marked out on charts, particularly for the Dow I have the 20,500 area marked and the 18,600 area marked. OMG, DOW, @ 18,600, WTF? I don't know if it will trade that low, but I've marked it as an area of interest to me.
In the meantime what I will do is continue to analyze companies and look for companies that will be able to maintain and then thrive in our new economic environment.
I've pointed out a few pretty good companies in the past in these articles that are worth a look, Johnson and Johnson (JNJ), Netflix (NFLX), Amazon (AMZN), Google (GOOGL), Electronic Arts (EA), and Square (SQ) to name a few.
Businesses and consumers have wants and needs and there are publicly traded companies that serve those wants and needs. I'll likely shift my analysis to the companies serving a need for now.
I believe it's still a hurry up and wait environment. Hurry up and do your research, get your lists together. Then wait for those companies to come down to a price where you feel there is value.
This is where I leave you with a 🤷♂️on the markets. It's just hurry up and wait, that's all we can do. Wait until the market offers us value.
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The Seville Report is our attempt to bring world class investment research to people who feel world class investment research isn't available to them. We also want to demystify the stock market for people who wouldn't think of putting their money in the stock market. Our research comes quarterly via our newsletter, The Seville Report. We use the website and this blog to share thoughts and ideas about the markets and different companies.