{"id":47425,"date":"2023-08-11T21:50:31","date_gmt":"2023-08-12T01:50:31","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/the-stock-market-is-falling-why-its-time-to-get-happy\/"},"modified":"2023-08-11T21:50:33","modified_gmt":"2023-08-12T01:50:33","slug":"the-stock-market-is-falling-why-its-time-to-get-happy","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=47425","title":{"rendered":"The Stock Market Is Falling. Why It\u2019s Time to Get Happy."},"content":{"rendered":"
\n
<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

Misery may love company, but it\u2019s bad for your investment health.<\/p>\n

The company part is easy to prove. Just look at the Cure, those 1980s-era musical purveyors of doom and gloom who recently finished up a very profitable summer tour. While it might not have been Taylor Swiftian in its success, it showed there is still demand for songs about emptiness and ennui. Still, even Robert Smith, the band\u2019s singer and main songwriter, knows there is a time for \u201cDoing the Unstuck\u201d\u2014a song featuring the refrain \u201cLet\u2019s get happy!\u201d\u2014even if it leads to puzzled looks. <\/p>\n

\n

This columnist, too, can get, well, stuck thinking about what can go wrong for the markets\u2014and the world. When stocks are falling, as they were last year, it\u2019s easy to remain tied to a bearish position despite signs of a turn, or to dismiss a gain as nothing more than a bear-market rally. There are so many risks these days\u2014from bank failures, an aggressive Federal Reserve, and still-too-high inflation to geopolitical tensions with China, war in Europe, and catastrophic weather\u2014that we want to apply for membership among the esteemed permabears of the world. <\/p>\n

It certainly felt that way this past week, one that included Moody\u2019s taking issue with the finances of U.S. banks, the imposition of U.S. restrictions on money heading to China, and a swoon in
\n Nvidia
\n (ticker: NVDA) and other highflying tech stocks. What\u2019s more, every gain, like the one that initially occurred following this past Wednesday\u2019s better-than-expected 3.2% rise in the consumer price index, was met by willing sellers. It felt like a moment to turn up the volume on the Cure\u2019s \u201cDisintegration,\u201d and wallow in the hopelessness of it all. <\/p>\n

And there\u2019s evidence to suggest that many investors are feeling the same way, despite the bounce in indexes like the American Association of Individual Investors sentiment survey, which shows 45% of investors labeling themselves as bullish. Savita Subramanian, head of U.S. equity and quantitative strategy at
\n BofA
\n Securities, notes that the bank\u2019s clients are still focused on what could go wrong, including consumers finally capitulating in the face of higher interest rates, tighter lending standards undermining economic growth, and a low
\n Cboe Volatility Index,<\/span>
\n or VIX, that could rise sharply. <\/p>\n

\u201cSentiment has shifted from abject fear and loathing to something a bit warmer,\u201d she writes. \u201cBut skepticism reigns.\u201d<\/p>\n

And that\u2019s a problem. Persistent gloom is a lousy way to make money in the stock market, at least in the U.S. Take the
\n SPDR S&P 500
\n exchange-traded fund (ticker: SPY), among the simplest ways to invest in the benchmark index. While last year\u2019s 18% decline was painful, for investors who take a longer-term perspective, it was just a bump in the road. The ETF has posted remarkably consistent returns, whether it\u2019s the 12% annual return over the past three years, the 12% over the past 10 years, or the 16.5% in 2023.<\/p>\n

None of this means being a Pollyanna. Markets are about pricing risk, and sometimes risks get mispriced. And since markets are ever in flux, active investors should always be thinking about what can go wrong, when to take profits, and when it\u2019s time to re-engage. Investors didn\u2019t have to realize that August\u2014one of the toughest months for stocks\u2014was commencing to know that stocks like Nvidia and
\n Palantir Technologies
\n (PLTR) were looking stretched and that a pullback could be in order. <\/p>\n

There are always ways to mitigate the risk we worry about. Take the low VIX that has some investors worried. BofA\u2019s Subramanian notes that the so-called fear index isn\u2019t mean-reverting, a way of saying that what goes down doesn\u2019t have to go up. While the index ticked has ticked up to 14.84 this week from 13.63 at the end of July, it remains well below where it was in March. <\/p>\n

Using the slope of the yield curve as her guide, Subramanian expects a trough in the VIX no earlier than the first quarter of 2024. Those worried about a resurgence of volatility, however, have a choice, as well. \u201cTiming is tricky, so to hedge against an earlier VIX spike, we like high-quality stocks,\u201d she writes.<\/p>\n

The
\n iShares MSCI USA Quality Factor
\n ETF (QUAL) and the
\n Invesco S&P 500 Quality
\n ETF (SPHQ) both offer a solid path to get exposure to quality stocks.<\/p>\n

If the tech boom that has carried the market higher this year really is ending, investors might want to consider looking at growth at a reasonable price, or GARP. Jefferies strategist Desh Peramunetilleke notes that switching to value probably doesn\u2019t make sense just yet, but buying stocks that are cheap based on their growth and have earnings momentum does.<\/p>\n

Stocks that have those qualities have many of the same qualities as the Big Tech names that have driven the market higher, but they come with a much lower price tag that could help them weather the pressure on valuation. GARP stocks highlighted by Jefferies include banking giant
\n JPMorgan Chase
\n (JPM), cybersecurity firm
\n Palo Alto Networks
\n (PANW),
\n Delta Air Lines
\n (DAL),
\n W.W. Grainger
\n (GWW),
\n Alphabet
\n (GOOGL), and Vulcan Materials (VMC).<\/p>\n

GARP might not be as fashionable as goth, but for investors, it could be a whole lot more profitable.<\/p>\n

Write to <\/strong>Ben Levisohn at Ben.Levisohn@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Misery may love company, but it\u2019s bad for your investment health. The company part is easy to prove. Just look at the Cure, those 1980s-era musical purveyors of doom and gloom who recently finished up a very profitable summer tour. While it might not have been Taylor Swiftian in its success, it showed there is […]<\/p>\n","protected":false},"author":1,"featured_media":47426,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-47425","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nThe Stock Market Is Falling. Why It\u2019s Time to Get Happy. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Misery may love company, but it\u2019s bad for your investment health. The company part is easy to prove. 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