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“Markets in Turmoil” – The Upside of Downside

Fear is in the air again. Over the past few weeks, the S&P 500, Dow, and Russell 2000 have given back all of their gains on the year.

Note: Index price returns, does not include dividends.

Meanwhile, international indices have fared much worse, with the average country ETF down 14% year-to-date.

Note: Total return, in U.S. Dollars, as of 10/24/18. Data Source for all tables herein: YCharts.

The list of countries hitting 52-week lows is a mile long…

And a number of key sectors are hitting their lowest levels in over a year…

If the month ended today, it would be the worst for the S&P 500 since February 2009…

Unsurprisingly, financial media has taken notice. For the second time in two weeks, CNBC has aired an after-hours special report…

Historically, such reports have have served as a bullish contrarian indicator, with above-average S&P forward returns and gains 100% of the time looking out over the next 3-12 months.

Now, before you get too excited, there’s an important caveat that must be noted.

The data set of “Markets in Turmoil” reports starts in 2010, and is therefore is limited to a bull market run where corrections have been short-lived. When next real bear market hits, there will surely be losses following these specials.

That said, as a short-term sentiment gauge, it’s been a pretty good one. And as a trader playing a bounce, I would much rather see a “markets in turmoil” special than regular programming.

For longer-term investors, the upside of downside is clear: it’s an opportunity to add money or reinvest dividends at lower prices/valuations and higher prospective returns. All long-term investors still in the a adding/reinvesting phase should be rooting for a bear market today, and many more “markets in turmoil” specials in the years to come. Bring it on.

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CHARLIE BILELLO

Charlie-Bilello

Charlie Bilello is the Director of Research at Pension Partners, LLC, an investment advisor that manages mutual funds and separate accounts. He is the co-author of four award-winning research papers on market anomalies and investing. Charlie is responsible for strategy development, investment research and communicating the firm’s investment themes and portfolio positioning to clients. Prior to joining Pension Partners, he was the Managing Member of Momentum Global Advisors and previously held positions as a Credit, Equity and Hedge Fund Analyst at billion dollar alternative investment firms.

Charlie holds a J.D. and M.B.A. in Finance and Accounting from Fordham University and a B.A. in Economics from Binghamton University. He is a Chartered Market Technician (CMT) and also holds the Certified Public Accountant (CPA) certificate.

In 2017, Charlie was named the StockTwits Person of the Year. He has been named by Business Insider and MarketWatch as one of the top people to follow on Twitter and his work has been featured in Barron’s, Bloomberg, and the Wall Street Journal.

You can follow Charlie on twitter here.

Disclosures:

Pension Partners, LLC is a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. For more information about Pension Partners please visit: https://adviserinfo.sec.gov/ and search for our firm name.

The information herein was obtained from various sources. Pension Partners does not guarantee the accuracy or completeness of such information provided by third parties. The information given is as of the date indicated and believed to be reliable. Pension Partners assumes no obligation to update this information, or to advise on further developments relating to it.

Past performance is not indicative nor a guarantee of future results.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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