Stocks got mulched on Tuesday as weakness in Twitter (TWTR), of all things, gradually spread through the rest of the tape. There are plenty of people who would take exception to the notion that a $20 billion (and dropping) social media stock could infect a $15 trillion marketplace, but that’s certainly how it seemed and there weren’t fresh catalysts to justify a fundamental reversal.
Regardless of the catalyst the price action was disquieting, particularly in the context of a market that inspires nothing so much as the desire to call a top. Robert Shiller has become one of the more recent to urge investors to the sidelines, suggesting that stocks have only been as overvalued as they are today three different times in history. Spoiler alert: all three of those occasions ended in tears.
In the attached clip Danni Hughes of Divine Capital Markets says the pundits calling for a crash may get to say "I told you so," but they seldom make people money. “At some point the market is going to crash and then it’s going to come back,” she rather boldly predicts. It’s just a matter of time.
Of course what people predicting a 1987-type of crash seldom point out is that the S&P 500 actually finished higher by more than 5% that year. History suggests there are two great opportunities for those looking to profit from crash prophecies. One is to sell books making the case for impending doom. The other is to look to buy dips, either much lower or on a slight market drop depending on your risk tolerance.
Hughes isn’t saying all is well. She’s been pulling some money to the sidelines for the last six or seven months. It’s there not as a way to pad her mattress but as a tool for taking advantage of the sharp downdrafts that have been popping up already this year and several times even during the bull market we’ve seen since the 2009 lows.
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