Hello Kirk,
Despite the fact that the S&P gained 4.74% last week (with NASDAQ gaining 5.2% and the Dow up 4.9%), CNBC’s Jim Cramer advised investors to sell stocks after the market closed on the previous Friday, October 14. At the close of that bottoming-out week, Cramer said, “The market is dominated by the tick, tick, tick of bonds, oil, and the dollar. So, remember, if we have a big up day like yesterday that is a chance to do some (selling) because there probably won’t be any follow-through.”
Hmmm! I am puzzled why Cramer didn’t just recommend buying oil stocks if he thinks oil prices are so high and disruptive, but perhaps after pushing some ESG-related stocks, Cramer may now be opposed to buying fossil fuel companies! Frankly, I hate to see anyone be so depressed, especially on national TV.
As of last Tuesday, we have had five significant short-covering rallies in October, and that’s a good signal that we are nearing (if not past) the end of the bear market. By mid-October, the S&P 500 had fallen over 25% from its previous highs. Since 1928, there have been nine drawdowns of 25% or more. Our friends at Bespoke Investment Group documented that after each of the past big drawdowns, the average gain from the bottom was +15.2% in the first month, +31.6% after three months, and +33.2% after six months.
The theory that investors should “sell all stocks” when many companies are profiting from inflation and continuing to post record sales as well as earnings, is puzzling to me, so I’ll write about that in more detail in my column this week....
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