March 30, 2018
We are living in interesting times where news platforms have become weaponized – they are more so used to annihilate a competing point of view than to promote affirmations of a favored ideology. This skewed analysis of the world has actually made the world more skewed itself.
Nowhere else are we seeing this other than in the financial world and the stock market. Rumors are elevated to headline status and non-stories become top stories by connecting fabricated dots rather than facts. They become part of the 24/7 news cycle, and from time to time they erupt.
The latest story of President Trump taking on Amazon (AMZN) is the perfect example of this. It’s no secret that the president has a bone to pick with Jeff Bezos – the owner of the Washington Post and CEO of Amazon – over unflattering reporting and too many false reports since he decided to run for the White House. However, the Facebook (FB) fiasco was another excuse to roll the story out again.
Even though the White House denied it was actively working on ways to curb Amazon’s reach, Wall Street couldn’t shake the story, which had been in the rumor mill for more than a year. Consequentially, Amazon stole the spotlight from Facebook, which still faces the wrath of an entire planet – not just an angry president who has been victimized by biased reporting.
So, how do investors survive and profit from these kinds of environments? I have one answer:
Don’t panic and buy the dips.
The market was all over the place on Wednesday with the Dow Jones Industrial Average once again relinquishing a 200+ point rally only to stumble into the closing bell. The good news is that a massive sell-off was averted. Moreover, we were reminded of the strength of the U.S. consumer. The final read for consumer sentiment for March was a lofty 101.4, the highest level since January of 2004.
The personal savings rate slipped to 2.6% from 3.4% in the preceding quarter and 3.6% a year earlier. That isn’t a great sign, but people are more confident when their paychecks are rising, and the stock market is on a historical run. The question is whether consumers have the ability to keep spending and driving the economy. I say the answer is yes, especially considering the employment and wage trends and the ability to stretch even more.
Thursday was the last trading day of the week, month and quarter, and I was thrilled to see the recent selling shaken out. Advancers blew decliners out of the water across the board, and each of the three major indices finished the day in the green.
Now we turn the page to a new quarter. We could be in for more volatility, but know that this selling is overdone and everyone should be ready to pounce. Remember, this is the time to buy great American companies at great prices.
Happy Passover, Good Friday and Easter. Enjoy the long weekend and be ready to get back to work next week.