Let’s get this out of the way…
I’m not a doctor. I don’t study the spread of pathogens. And for the most part, I work with the same data everyone else does.
I’m also human. And that means that my first reaction to the news of coronavirus was probably a lot like yours… emotional.
Aside from wondering how to protect myself and my family, some of those thoughts were related to the markets.
“Could this be what finally pushes us into recession?” I questioned. “Will this cause the end of the Melt Up?”
These are normal concerns. And when news of the virus first broke… nobody had informed answers to these questions.
China, and the rest of the world, were just trying to figure out the basics. But today, our position is different.
We know a lot more about what we’re dealing with. We even have data to help us answer those questions.
But let me spoil today’s essay up front… Coronavirus isn’t going to stop the Melt Up.
Now as I already mentioned, I’m not a doctor. So, when it comes to protecting yourself or your family, listen to the experts, not me.
That said, when it comes to protecting your finances, I think I can help. And that’s why I’m writing to you today.
The problem is, headlines are persuasive. They encourage you to act on emotion rather than data.
I’m sure that some investors panicked out of the market as soon as the news broke. I hope that wasn’t you – because it would have been quite the mistake. Take a look…
Coronavirus first popped up in early December. And in fairness, it didn’t enter the global spotlight until mid-January.
At that point, fear did cause a few bad days in the markets. But look what has happened since… We’ve already stormed back to new highs.
Yes, we’re likely nearing the end of one of the greatest bull markets America has experienced. And fear – at least fear of coronavirus – hasn’t put a stop to it yet.
This is exactly the kind of behavior you expect to see in a Melt Up scenario. The Nasdaq is making new highs. Even in the midst of an epidemic, investors are eagerly buying innovative tech stocks – the kind that tend to soar in the final months of a great bull market.
So, is the coronavirus the end of the Melt Up? Right now, the data says no. The market has digested the news on coronavirus… And it’s still moving higher.
It’s not just tech stocks, either. The S&P 500 is making new highs too.
Is it possible this could take a dramatic turn for the worse? Sure. In finance-speak, we call that “tail risk”… a surprise event that could cause major losses in the markets. But unless you have the gift of foresight, planning your life around those events is a losing strategy.
For those of us not hiding out in bunkers, the answer is clear.
Stocks are still headed up. And we want to ride as much of the Melt Up as we can.
You don’t want to be on the sidelines as the market pushes to new heights. So, don’t let your emotional reactions to headlines dictate your investing.
As investors, we should strive to make the best decisions using the best data available. And right now, the best data we have is telling us the Melt Up isn’t over. Stay long.
Good investing,
— Vic Lederman
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Source: Daily Wealth