Tweetatility
I think I’ve come up with a new word, “Tweetatility”. Definition: the amount of market movement caused by the Presidential Tweeting. Last week was a classic reminder of how the negotiating tactics of the current administration can punch you in the face, then let’s play golf to settle on something in the middle. An escalation of tariff talks by both China and the U.S. had the talking heads on TV spewing everything from China selling all their U.S. debt to a devaluing of the Yuan to a full boycott of U.S. goods.
Well as per usual we see the market react quickly to the news and again in my view, opportunity presents itself. The Dow Jones average (which is a price weighted index) was down mainly due to three stocks. The Russell 2000 being a mainly U.S. based index finished positive for the day. Look, if China were to make any of the measures mentioned above, that would ultimately hurt their economy far worse. FactSet released last week that the total U.S. exposure to Chinese tariffs would be $130B versus the $450 Billion the Trump administration threatened.
So again, I implore you to be entertained by the rhetoric rather than be fearful. Time heals all wounds as my mother told me when my first girlfriend dumped me, and as per usual she was right. I expect this will be another of those times when the mum’ism works (no I didn’t spell it incorrectly – she’s still in Australia). A good visual of that is a graph I saw in Rich Bernstein’s article of last week that shows the percentage of receiving a negative market over different time periods.
What starts as a 47% chance of loss in any one day goes to 10% for 10 years. Now work done by Jeremy Sigel from the Wharton School of Business, (published in his book – Stocks for the Long Run) showed over the worst 20-year period in the past 200 years, stocks gained 20%.
If you ever hear Warren Buffet speak, he is always talking about time horizons that are longer than 20 years. Forever is how long he wants to hold a stock when asked. 20 years sounds like a period beyond our vision, however last week I met my daughter for a beer after work. Those 21 years went by in a flash, as I’m sure will the next 21, I’m not going to be the guy watching it go by.
Here’s the buy/sell
Source: MG&A
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