Yes, buy stocks in a declining market (but be careful)

But do not get me wrong. Buying now is not a safe bet in the short term. And Mr Romick pointed out that it would be foolish to buy in this market in the hope of making a quick profit. On the contrary, he said, he has no idea where the stock market is heading for, say, the next three months, except, “I expect there will be a lot more pain. , Unfortunately.”

With this in mind, Mr. Romick suggested a reflection exercise. Imagine that the stock market, with all its swerves and false signals, won’t even exist for those three months. “The question then is, when the market returns in three months, what should I have in my portfolio that I want there for the next five to seven years? He said, “We make investments with that kind of horizon in mind.

With its long-term view, the FPA Crescent fund has turned more bullish now that we are in a bear market, fund data suggests. Its net allocation to equities on February 19 – the peak of the S&P 500 – was 57%. By March 13, it had risen to 67%. In that same stretch, the S&P 500 was down 20%, according to FactSet. In other words, the overall market represented by this index has become 20% cheaper. (The bad news, or the good, depending on whether you’re buying or selling, is that it got even cheaper.)

Unlike index fund investors – and I am one of them – Mr. Romick does not invest the entire stock market. Instead, he buys individual stocks. Citing regulatory constraints, he did not disclose his latest purchases. But he cited Alphabet, Google’s parent company, and the American International Group as long-standing portfolios that are even more attractive now that they’re shelled.

Google relies on advertising for the bulk of its revenue, which worries some investors in this environment, and AIG, a global insurance group that was bailed out in the latest financial crisis, will face losses in this environment. insurance related to the coronavirus, Romick said. However, he is confident that both stocks will continue to be profitable for his fund, even if their prices fall further in the coming months.

Still, he doesn’t recommend that ordinary people jump into equities right now.

Others are even more categorical. For example, Richard bernstein, a former Merrill Lynch strategist who now runs his own business, said he believes investors are just beginning to understand the reality of a bear market. This is not surprising, he said, because a falling market usually has three important phases.

In the first phase, he said, people tend to say things like, “The worst is over. There are good deals. I have to get started. The second is, “No, it’s worse than anyone ever imagined. Right now, he said, people are probably hesitating between those two attitudes.


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