Nice bounce yesterday with the S&P500 (^GSPC) taking back about half of the losses since last Friday and high-flying names like Facebook (FB) recording badly needed snap back rallies. As the dust settles it seems the prevailing mood on Wall Street has gone from trying to avoid catastrophic losses to assuming that the last month has been a replay of January’s decline (read: another chance to buy every conceivable dip and let the consequences be damned).
In the attached clip Jason Trennert of Strategas is quick to disabuse investors of any notions they may have about volatility being over but is still encouraged by the long-term heath of the market.
“You’ll probably get more volatility over the next quarter or so,” says Trennert, “But by the same token I think people have to keep things in perspective. Corporate profits have reached an all-time high both per share and on a notional dollar basis. I remain pretty bullish on the markets. We’re due for some kind of correction and I think we’re getting it but some of the claims tahat the end is neigh are overblown.”
The danger for individuals involved in this kind of tape is buying every rally and selling all the dips. Yesterday was a nice reprieve in the aforementioned Facebook (a name emphasized in this space because it serves as a decent proxy for all-things speculative) but there were plenty of individuals who found themselves selling the lows on Tuesday then buying their positions back in a panic when the stock was up 7%.
To those poor souls Trennert suggests backing up and remembering that valuation always matters. Corrections lead to selling that takes down blue chips as well as garbage names. For those looking to take advantage of dips in what he thinks will be a choppy market, Trennert’s firm has a list of stocks with strong underlying cash flows and a certain level of stability.
They may not be as thrilling as trying to time the dips on the high-beta names but most investors have had more than enough thrills to last them for a while over the next few weeks.
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