I love this cartoon that @stockcats posted:
I am a believer in panicking early.
Most of the stock investing I do is in my retirement accounts. I can panic early and if I have gains not worry about taxes.
I use a long term trend/momentum strategy for part of my stock portfolio so I can sell on the ride up. I can panic early. The price of this strategy is the possibility of a whipsaw which I just live with. There is no perfect strategy. I’m just comfortable leaving parties early.
Over the years I have also built my 8 to 80 portfolio of stocks…so when others panic, I can go shopping.
This week felt like a panic. It was an early panic, so my momentum strategy forced me out of stocks. I did not yet do any buying in my 8 to 80 list, but if the panic persists, I imagine I will be buying a few stocks soon.
There are a lot of reasons investors might have panicked. I liked Ben Hunt’s piece best titled ‘The Narrative Giveth and The Narrative Taketh Away‘. Take the time and read it.
Ben’s view: the inflation narrative will surge again, as wage inflation is, in truth, not contained at all.
My favorite parts of Ben’s piece:
The stage is now set for an explosive market re-evaluation of inflation and its impact on the price of money and the real return on invested capital. This is no longer a complacent crowd. This is now a highly focused crowd. The crowd is now watching the crowd in regards to inflation. Everyone knows that everyone knows that inflation is an important issue. The only thing missing is the Missionary statement, the little girl crying out that the Emperor has no clothes. That’s when common knowledge crystalizes into behavior. That’s the freak-out moment for markets.
What is the crystalizing Missionary statement? I think it’s wage inflation in a future jobs report.
To steal a line from Game of Thrones (see, told you I couldn’t help myself), we’re now at the point where the catch phrase is about to shift from “Inflation is Coming” to “Inflation is Here.” And if that’s married with disappointing growth from say, oh, I dunno … a TRADE WAR WITH CHINA … well, that’s not just inflation, that’s stagflation. And that’s the market equivalent of the Night King and the White Walkers running rampant over all of Westeros. Is that the most likely scenario? No. Is it a scenario that we need to take seriously? Absolutely.
So what’s to be done?
Well, it’s time to stop thinking about what inflation means for your portfolio, much less stagflation, and start doing something about it. And yes, I know our inflation-investing muscles are severly atrophied. Time to start flexing those muscles. Time to start exercising those muscles. Because you’re going to need them.
The Fed is also acting like inflation is a big possibility and no matter how much Trump whines, the market is still expecting another rate hike. Charlie has the goods here.
This should be an interesting week in the markets.
In the meantime, It is Sunday and I plan on doing what every other New Yorker does (for once)….have a nice brunch.
Also published on Medium.