Should The Stock Market Have You Panicking?

NYSE: SPY | SPDR S&P 500 ETF Trust News, Ratings, and Charts

SPY – The painful irony is that in 2019 the U.S. stock market has gained some $5 trillion. Can you imagine what the gains might be if those flows reversed? Read for details.

Don’t Panic…Yet

One of the best-known quotes on investing comes from Jesse Livemore, who said:

“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!”

He died broke by suicide, which by no means should diminish the essential truth in his message; which was to be patient, and stay the course And in the age of passive/index fund investing, is even more applicable.

For the most part, in the past few years, it has been the “most hated rally ever.”  But, however precarious,  the seemingly best advice for longer-term investors is to simply stand pat.

As this article in Bloomberg highlights, investors have been inundated with the message that a ‘big comeuppance is coming’ and one should dump stocks and hide out in ‘safe’ assets such as bonds and gold.

And even stocks hit all-time highs — money flow data confirms that people are following this not-so-sage advice.  For the year to date, some $150 billion has been pulled from mutual and ETF funds while over $275billon has been put into bond funds

The painful irony is that in 2019, the U.S. stock market has gained some $5 trillion –that’s a ‘T’ in value.

Can you imagine what the gains might be if those flows were reversed?  Which may be why Larry Funk, the CEO of the world’s largest money management and ETF firm, continues to call for a market melt-up, as people remain underinvested.

For the most part, the lack of enthusiasm can be taken as a contrarian indicator as stocks can continue to climb a wall of worry. Look at how portfolio protection in the form of put buying continues to trend higher even as stocks climb.

Note: How portfolio insurance was at two-year low heading into the December sell-off. In fact, the increase of put protection now becomes a safety net, which would prevent a major sell-off.

Indeed, note how since the beginning of 2019 the pullbacks or drawdowns have become briefer and shallower as stocks have climbed higher.

So, while hedging could easily turn out to have been wise, so far it’s been money that might’ve been spent elsewhere.

As Jesse said, sometimes the best course of action is no action at all. Just let the flow take you, and right now that’s higher.

SPY shares were trading at $299.52 per share on Tuesday afternoon, up $1.62 (+0.54%). Year-to-date, SPY has gained 20.96%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author: 

Steve Smith has more than 30 years of investment experience and an expert level of options knowledge. He was a seat-holding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from 1989 to August 1997.  In 1998, he joined as the senior option columnist and chief derivatives strategist. In 2003, he launched an option-based newsletter, OptionAlert, which was awarded the MIN “Best Business Newsletter” in 2006. In 2009, he joined Minyanville as a contributor and launched the proprietary OptionSmith newsletter. In 2010, he joined New Vernon Capital, a family of hedge funds with over $2 billion of assets under management, as risk market consultant to utilize option strategies to reduce portfolio exposure and enhance returns for the four main funds.  In 2015 he began working at the Adam Mesh Trading Group, where he currently authors the Option Sensei newsletter and manages theOptions 360 advisory service.

This article is brought to you courtesy of Stock News.

About the Author: Option Sensei

Steve has more than 30 years of investment experience with an expertise in options trading. He’s written for, Minyanville and currently for Option Sensei. Learn more about Steve’s background, along with links to his most recent articles. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
spyGet RatingGet RatingGet Rating

Most Popular Stories on

Inflation Not Fading Fast Enough for Stock Investors

Investors may have celebrated the end of high inflation too soon. The CPI report shows inflation bouncing higher and thus pushing back the start date for Fed rate cuts. This has the S&P 500 (SPY) coming off recent highs. This begs questions like how much more downside could we see? And when will the bull market get back on track? 44 year investment veteran Steve Reitmeister shares his answers to these questions in this timely commentary including a preview of his top picks to stay ahead of the pack. Read on below for more...

3 Auto Stocks to Consider Over TSLA in April

Tesla (TSLA) reported a decline in deliveries in the first quarter, and Wall Street expects the company to deliver fewer vehicles than last year. Furthermore, rising competition, slowing EV sales, and stretched valuation make TSLA unattractive from an investment standpoint. Considering these factors, investors could consider buying fundamentally strong auto stocks Blue Bird (BLBD), Rolls-Royce Holdings (RYCEY), and Stellantis (STLA) over Tesla (TSLA). Read more...

3 Top-Rated Tech Stock Buys for Value in April

The technology sector is undergoing a notable surge, propelled by increasing digitalization endeavors among businesses and governmental support for technological progress. So, fundamentally sound tech stocks Box Inc. (BOX), Teradata (TDC), and Materialise (MTLS), which seem pretty undervalued, might be ideal buys this month. Continue reading...

Top Software Stocks at the Forefront of Market Gains

The software industry's prospects appear bright due to increasing investments in digital transformation, high demand for advanced software services from various sectors, and the integration of emerging technologies such as generative AI. Therefore, investors could consider buying quality software stocks Autodesk (ADSK), DocuSign (DOCU), and Pegasystems (PEGA) for solid gains. Read more...

Updated 2024 Stock Market Outlook

The bull market continues to rage on with the S&P 500 (SPY) making new highs. That is the past...the question is what does the future hold? That is why 44 year investment veteran Steve Reitmeister provides this updated 2024 Stock Market Outlook to help you carve a path to outperformance the rest of the year. Read on below for the full story...

Read More Stories

More SPDR S&P 500 ETF Trust (SPY) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SPY News