It was certainly an interesting week on Wall Street. It began with a stampede of bulls running up stock prices and ended with bears clawing those prices back down . . . violently.
To add to Friday's dramatic sell-off, don't forget it was an expiration Friday, when most options and futures expire or rollover. That is is called "triple witching day" and is almost always one of the most volatile days each quarter. Since Friday was the last time in this year, there was even more "window-dressing" than normal, to make year-end statements look healthier.
The only weak spots in the economy that cause me to lose sleep right now are energy and junk bonds, which are inter-related. Solve the energy problem and you will also solve the junk bond problem. As we've discussed, the energy problem is too much supply, both oil and natural gas. Maybe, that is just too much of a good thing? Remember 1972?
Many analysts are concerned that corporate earnings have stalled. That is a legitimate concern, but I suspect it will be transitory. Recent outbreaks of cooperation in Washington have fueled my optimism. 2015 was an exciting year on Wall Street, but very little value was created, if any. I suspect that "wheel-spinning" will continue until next summer, especially if uncertainty about the presidential election begins to fall.
Most portfolios should just sit tight during this spasm. If you are nervous, you could increase your cash level by selling energy-exposed assets. If you still do the traditional Christmas gift-giving, please don't stop or decrease it, just because of the stock market spasm.
Don't grab your chest, screaming "this is the big one!" It is NOT.
This too shall pass . . . now, go enjoy the holidays!
To add to Friday's dramatic sell-off, don't forget it was an expiration Friday, when most options and futures expire or rollover. That is is called "triple witching day" and is almost always one of the most volatile days each quarter. Since Friday was the last time in this year, there was even more "window-dressing" than normal, to make year-end statements look healthier.
The only weak spots in the economy that cause me to lose sleep right now are energy and junk bonds, which are inter-related. Solve the energy problem and you will also solve the junk bond problem. As we've discussed, the energy problem is too much supply, both oil and natural gas. Maybe, that is just too much of a good thing? Remember 1972?
Many analysts are concerned that corporate earnings have stalled. That is a legitimate concern, but I suspect it will be transitory. Recent outbreaks of cooperation in Washington have fueled my optimism. 2015 was an exciting year on Wall Street, but very little value was created, if any. I suspect that "wheel-spinning" will continue until next summer, especially if uncertainty about the presidential election begins to fall.
Most portfolios should just sit tight during this spasm. If you are nervous, you could increase your cash level by selling energy-exposed assets. If you still do the traditional Christmas gift-giving, please don't stop or decrease it, just because of the stock market spasm.
Don't grab your chest, screaming "this is the big one!" It is NOT.
This too shall pass . . . now, go enjoy the holidays!
