The S&P 500 is down 7% within the last month and was down 9% before recovering slightly. Many bears are now convinced that the end of the bull market is upon us and that the market is due for a more significant downturn. Our question is how long into the selloff should you wait to pick up bargains? CNBC writes that the selloff is not over.
“This is the second decline of this year of 5 percent or more and two out of every time we had more than one decline in a year, the second decline was sharper than the first,” Stovall said. The S&P 500 dipped to 2,710 last week, a 7.8 percent decline from its all-time high in late September. In February, the S&P was down nearly 12 percent at its low. “There could be a test of the lows.
Successful long term investors stay in the market through its ups and downs. And successful long term investors are sure to buy at the low points. The point of value investing is based largely in assessment of intrinsic stock value. And, the intrinsic value of an investment is based on its forward-looking earnings potential, not its lowest price as investors pile out of the market to avoid more losses.
How Long Should You Wait?
The market keeps rising and falling. This sort of volatility tells us that many investors are getting out because they think that the bull market has run its course and is ready to crash. And, many investors think the market still has room to run so they are buying on the down-swings. Seeking Alpha writes about whether or not this is the start of a bear market.
This is still a bull market.
The bull market doesn’t have a lot of room left, probably 1 more year.
Leading economic indicators continue to improve, which is long term bullish for the stock market & economy.
The Freight Transportation Services Index is still trending higher. Historically, this leading indicator tanked or swung sideways for many years before bear markets and recessions began.
That having been said, if you believe what these folks are saying, stay in the market a little longer and don’t start looking to see bargains until sometime in 2019. But, is this the only opinion?
Forbes writes about what to do after a stock market crash, so they are thinking this could happen in the near future. They suggest that you consider what will be good long term investments and then pick up bargains when the market tanks.
Think about the products and services you spend your money on. They may be a place to start looking for potential investments. What are the trends today that will continue for years? For example, are health care companies something that could have strong sales for years to come? Perhaps they are worthy of further investment research. For instance, are they undervalued or overvalued? What is their earnings growth rate? Is it sustainable? Is it steady? What is their relative strength compared to their competitors? Are insiders buying?
This is the long term, value investor, intrinsic value approach that has served many so well over the years. If you believe what Seeking Alpha has to say, you have a few more months until there will be bargains available and if you believe Forbes, you should start thinking about long term investments to make when the big correction finally happens.