Tuesday, October 30, 2018

Hold Your Horses Folks

Stocks are staging a bit of a comeback this morning that might (big "might") actually stick for a day or two.

Regular readers know that I remain bullish longer-term, but notably skeptical shorter-term on the path for equities. That said, in the very short-term it wouldn't surprise me to see the market sustain a brief rally.

Not, alas, because there's been an announcement that the U.S. and China are coming to reasonable terms on their trade dispute (that, I strongly suspect, would spur much more than a brief rally), but based on the simple fact that October's been a horrendous month, and the last couple of days will likely see a bit of portfolio rebalancing that will have funds that maintain a strict equity/fixed income mix buying beaten up equities to fix their underweightness. Although, there's no guarantee that that buying won't be met by yet more aggressive selling, in which case forget about what I just wrote.

Studies do show unusually positive returns on average during the last two days of really bad months.

My point is simply that we shouldn't get our hopes up that what may amount to merely a rebalancing rally spells the end of the correction and the ascent to new all time highs just yet -- not with the still unabated immediate headwinds stock prices face.

Of course, all that said, you and I -- being patient long-term investors -- never pin our hopes to short-term dynamics anyway, right?

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