I was out last Friday, so I didn't have the opportunity to comment on the best week we've had in a while. The market was off on Monday (the 9th), but on Tuesday we posted a dramatic recovery, followed by three more up days. 676 points gained on the Dow in four days! That's over 10%!
What sparked the rally? Well, on Tuesday Citigroup announced that they had their best quarter since 2007. As the market took off on this news, I began to get phone calls and e-mails laced with incredulity. That's it? That's all it took? We've been living through all this, and one company, one that's been struggling to stay afloat, that's fallen from over $27 to under a buck in the last year, says that they're having a not-so-bad quarter, and the market takes off? Moreover, it required an influx of BILLIONS of dollars of Federal money and outside investor capital to do it, and the market thinks that's great?!?
Not quite. The market was way oversold. Like, oversold to epic proportions. All we needed was a spark to start the fire, and the one little piece of good (or maybe just not-so-bad) news was the spark. After a slight breather early this week, the market climbed as high as 7,571. That's over 1,000 points in 7 trading days. Granted, once we hit that high of 7,571, the market has trended back down for the past two days. And we haven't been living without intraday volatility either. Regardless, we ended up for the week for the second week in a row. I don't know how long it's been since I could say that.
We're not out of the woods though. The economy is still struggling, and likely to be weak for some time. It will likely look darker still in a few months. Which begs the question: "If we think the economy is going to remain weak, and will probably look even weaker in the near future, is now the time to sell?" In a word: No. Now is the time to posture a portfolio for the coming recovery. Stocks may get cheaper in the short run, but figuring out where that bottom is will only be done in hindsight. In the long run, this is probably one of the best opportunities to buy stocks that any of us will ever see. I'm not saying to push all your chips to the middle of the table and go all in, but that there are opportunities everywhere to buy great companies while they're on sale. This is the stock up sale, and it's not the generic canned beans on aisle 5. It's the good stuff. The stuff we wouldn't ordinarily buy because it's always too expensive.
It may be scary to be investing when the conventional wisdom says that the stock market is a losing proposition, but I've found that conventional wisdom is rarely wise. Most investors underperform the market because they are only comfortable buying in when it's at its high, and don't want anything to do with it when it's at the lows.
