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Marc Cuniberti: Market unpredictability

The ups and downs in the markets continue to keep investors guessing. With 2020 only three quarters of the way through, there is little doubt in anyone’s mind that this year is one of the strangest ones on record. It has also been an unfortunate series of events that have roiled markets, shut down economies, caused untold economic damage and personal misery, and has arguably pitted half the country’s inhabitants against the other half.

The result in the world of investing has been record breaking crashes followed by breathtaking recoveries, only to have the cycle seemingly repeat over and over as the latest headlines hit the wires.

Sector rotation has been exhibited in spades in 2020, meaning one day one sector will rise like technology, and the very next day tech reverses and industrial sectors skyrocket.

No doubt in the repeated rinse cycles of these rotations, the amateur day trader has been made rich one day only to be taken out to the woodshed the next. Mr. Newbie Day Trader, enticed by headlines of daily doubles in certain stocks and with lots of time on his hands sequestered in his home, entered the markets through quick trading platforms like Robinhood and E Trade. He bought high flyers like Nikola and Zoom and played the riskiest sectors like cruise ships and airlines.

The take away on this whole market has been unpredictability. I have always said the market will reflect reality eventually, but its day to day movements are only the sum of the conceptions of the billions of players in it at any one time.

But Mr. Market usually punishes beginners mercilessly, but only after having lured him in by giving him an initial quick profit or two to complete the “set up.” Unlike the dot.com rally that continually lifted all boats in the internet arena, the COVID-19 trading has been as bipolar as it gets, hoodwinking even the most experienced traders.

The take away on this whole market has been unpredictability. I have always said the market will reflect reality eventually, but its day to day movements are only the sum of the conceptions of the billions of players in it at any one time.

What we can be certain of from the stunning wild swings in both indexes and sectors is that nothing IS certain.

Unlike one-off events like 9/11, Y2K or a major bank imploding, where the event has a beginning and an end, COVID-19 is different. Its outcome is unknown, its timing uncertain. It could end tomorrow with a vaccine announcement, or go on for months or even years.

The decisions on how to address it have been difficult and controversial. The radical idea of shutdown has devastated economies worldwide. Businesses have folded and will continue to do so causing untold human suffering. COVID-19 itself has sickened millions and killed hundreds of thousands. Adding market insult to injury is an election which is arguably the most contentious in history. Wildfires in the west only adds to the suffering and heaps on mounds of more uncertainty.

Navigating these markets has been difficult if not impossible for many. In times like these, the fewer things investors do to try and second guess the next turn in direction the better. Investors might consider lightening up holdings and going to more cash. Cash smooths out bumps and grinds and reduces volatility. Short term U.S. treasuries can provide safe harbor as well as increasing more in fixed income holdings but the investor must even choose these with care.

Professional management is available for those throwing up their hands in despair, but as in all things, take your time in selecting those that might steward your retirement funds and interview many. For those attempting to go it yourself, education is the cornerstone of progress and the more you learn about what makes markets tick, the better your odds of successfully navigating the current economic environment, which at some point will eventually settle down. When that happens however is anyone’s guess.

Opinions expressed here are author’s alone, are opinion only, and not those of any bank, investment advisory firm or news media company. Nothing stated is meant to insure a guarantee of any kind, or to be construed as individual investment advice. Neither Money Management Radio (“Money Matters”) nor Bay Area Process receive, control, access or monitor client funds, accounts, or portfolios. For a full list of the services Marc Cuniberti provides, please contact him directly. California Insurance License #0L34249. Insurance services offered independently through Marc Cuniberti and not affiliated with any RIA firm or entity. 530-559-1214


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