Saturday, November 5, 2016

US Market Record 9 Consecutive Losing Streak

The S&P 500 could be on the way to make a record history by Monday should it record another losses. The longest streak was 9 consecutive losses when it happened in the 1980 when the index dropped by about 9%.

We are about to witness another pivotal moment in the history of the US market when they will announce a new President in just a couple more days. From an investor's point of view, the last time we get this kind of nervy feeling was back during the historic Brexit event which occurred not too long ago. A tense and similarly eerie feeling is in the air should Trump manage to beat all the odds by winning over favorite Clinton.

This time round, the market was only down by about 3.5% and volume does seem low, which seems to indicate that only a certain portion of investors are cashing out in fear that something might happen. The long term investor seem to be holding on to what they have, knowing that regardless of who wins, it'll be just another incident where either the Democrats or Republican takes office. The rest of the smart money seems like they are waiting on the sideline to see what event might takes place before putting their money into the market.

Ryan Detrick from LPL Financial drew out an interesting table about the after-event short term and long term effect of these consecutive losses.

Based on the table, the 3, 6 and 12 months effect after 9 consecutive losses are usually positive and they are positive by quite a bit, which indicates that it is usually short lived and investors might be in a better position to take advantage of such down market.




I am guessing this is simply a sign of a nervous but healthy market. Nervous and short term minded investors are heading for the exit while the long term investors are scooping the deals for the long haul. It seems like over the long term, there is only one direction where the market is heading, and that is up.


10 comments:

  1. Hi B,
    Yes , market always volatile prior presidential election,,,but as what you said,,,"over the long term,there is only on direction..." , below link is a very good pice of info and chart from MarketWatch.com .
    Cheers !

    https://trader535.files.wordpress.com/2016/07/share-prices8.pdf?link=mktw

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    1. Hi STE

      Thanks for the link. Very exciting times indeed.

      Delete
  2. I have close to $40k cash on hand (including my emergency fund), I'm not selling anything, but I'm pacing my buying. I don't want a huge sell off and don't have any cash to buy.

    Otherwise, having some cash on hand is nice.
    What I want is to see 50% drop so I can convince Mr.W to put his $300k cash into the market. Right now, the inflation is making his money irrelevant. He's not earning any dividend or interest.

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    1. Hi Vivianne

      That's a decent level to have.

      I've got quite a bit of warchest as well to pump in if opportunities arise and seems like we're probably not going to have it tonight.

      Delete
  3. A few more days and we witness the presidential results. Not sure if stock market will rally or plunge.

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  5. Nervous markets usually equate to buying opportunities. Whether the market will be up or down in the coming days and weeks I plan to stay put and keep making my regular monthly investments.

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    Replies
    1. Hi Divhut

      Like you always does, every week every moment.

      Delete
  6. A small change in the S&P caused my 401K to be down by $10K, 70% of my position is in the S&P. Yikes! but I'm not withdrawing and continue to make scheduled contribution, so I'm actually okay to see the price go down.

    We'll see what happen tomorrow night, though!
    Cheers!

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