To say that this is a tough market may be the understatement of the year so far. Lots of areas are getting beaten to a pulp daily, the economy has sputtered, the masses have been fooled by the direction of interest rates, there is a new so-called crisis every time you turn around, and as a result, it has been oh-so easy to be in the wrong stuff at the wrong time. And yet through it all, the Dow Jones Industrial Average and the S&P 500 remain just one day off their all-time highs.
But your Google (NASDAQ:GOOG) (GOOGL) shares are down on the year. Your Netflix (NFLX) holding has struggled. Your Biotech ETF (XBI) is giving you fits. You now avoid looking at your social media positions (SOCL). And even your trusty Amazon (AMZN) is sporting some fairly serious red ink right about now.
From Worst to First And...
And then to make matters worse, all the things that stunk up the joint last year seem to be doing pretty well this year. That's right, those emerging market ETFs (EEM) would be making you smile right about now. Europe (EZU) is marching higher. India (NYSEARCA:EPI) and Turkey (TUR) are rockin'. Real Estate (IYR) is movin' on up. And agriculture (DBA) is a great position these days. Oh, and those bonds (IEF, AGG, LQD) that everyone was so afraid of coming into 2014... yep, they have been working nicely.
In short, the stuff that wasn't working is now working. And the areas which were working, now aren't - at all. So, make no mistake about it; it's tough out there right now.
But Don't Despair
Believe it or not, this quick review of the market situation is not intended to discourage you. No, just the opposite actually. You see, it is vital for investors to recognize that there are times when Ms. Market's game is a piece of cake and making money is a snap. But then there are other times when it seems nearly impossible to make any headway in your portfolio. And this dear readers, appears to be an example of the latter.
The problem is this is the type of environment where individual investors - especially those trying to trade the markets - can lose their way. This is when people give up on their strategies. This is when the grass looks greener on the other side of the indicator fence. And this is when folks tend to throw up their hands in frustration.
But here's the good news: this too shall pass. At some point, perhaps soon, a meaningful move will begin. And the point is that you need to be ready, willing and able to take advantage when the next big move comes along.
Remember, You've Got to Be Ready
When the time comes, you've got to have a clear head. You've got to be ready to a make a move. You can't be mired in misery after a few crummy trades or a bad stretch in the market. No, you have to have the ability to step up to the plate with confidence.
In other words, you've got to have a plan or a strategy designed to tell you that the game is about to get easy again.
Easier said than done, right? So, the question, of course, is how does one accomplish this task? How do you deal with the nightmare that is 2014's stock market and still have the ability and the courage to make the move that could wind up making your year?
One Answer Is To...
One answer is to have (a) a disciplined approach that you can believe in and (b) the commitment to stick with it during the "sloppy" times (like we're seeing now).
To be sure, such an approach isn't for everyone. First of all, finding a system or a strategy that works well during most environments can be a challenge. Then there is the issue of being able "live with" your chosen approach for the long-term.
But, Please Understand...
Should you choose such a path, please understand that your faith in your chosen approach WILL be challenged at times. You WILL, absolutely, positively feel like a dummy for doing what you are doing on occasion. You WILL want to quit. You WILL be told you are wrong. And you WILL most definitely want to "tinker" with your approach or strategy when things get tough.
However (btw - it is best to imagine an evangelist preaching this next part to you) IF you believe in your approach, then by all means, have the tenacity to stick with it when the road gets bumpy!
Understand that there is no such thing as a "Holy Grail" in investing. All strategies have flaws. All systems struggle from time to time. And every single approach to the market will make you question them from time to time.
Wanna Be Like Buffett?
Perhaps the best example of this point would be legendary investor Warren Buffett. Today, the "Oracle of Omaha" is viewed as one of, if not the greatest investor of all time. When Buffett talks, people listen.
"Buy when there is blood in the streets," Buffett opines. And Buffett did just that when he saved Goldman Sachs (GS) in 2008. But, do you remember how that investment in GS performed immediately after he made it? In short, it wasn't pretty. But that deal eventually worked out really well for Buffett and his partners - because they believed in what they were doing.
And in case you've forgotten, Buffett was also the butt of jokes in the investment community as the tech bubble raged in the late 1990's. Mr. Buffett proclaimed quite publicly that he didn't "understand technology" (which we later learned meant that he believed the valuations in tech had become ridiculous) and he wasn't going to partake in the tech party taking place on Wall Street. And we all know how that turned out.
The point this morning is to understand that sometimes Ms. Market's game is hard and that you've got to have a little faith in what you are doing. While this sentiment may sound incredibly simplistic, experienced investors will concur that sometimes a little pep talk can go a long way. So, here's wishing everyone the best of luck out there!
Publishing Note: I am traveling Friday through Wednesday and will publish morning commentaries as time permits.
Turning to This Morning...
The ECB is openly talking about policy measures designed to stimulate the eurozone economy today while the Bank of England is discussing when the first rate hikes are to be expected. Here at home, investors will be focused on the macro data and the question of whether or not the blue chip indices can push higher in the near term. Currently U.S. futures point to a modest pullback at the open.
Here are the Pre-Market indicators we review each morning before the opening bell...
Major Foreign Markets:
- Japan: -0.13%
- Hong Kong: +1.03%
- Shanghai: -0.13%
- London: -0.12%
- Germany: -0.16%
- France: -0.18%
- Italy: -0.48%
- Spain: -0.22%
Crude Oil Futures: +$0.29 to $101.99
Gold: +$10.10 at $1304.90
Dollar: higher against the yen and pound, lower vs. euro
10-Year Bond Yield: Currently trading at 2.576%
Stock Futures Ahead of Open in U.S. (relative to fair value):
- S&P 500: -2.40
- Dow Jones Industrial Average: -9
- NASDAQ Composite: -5.73
Thought For The Day... "It's a beautiful day, don't let it get away" -Bono
Positions in stocks mentioned: none