When the Bottom in U.S. Stocks Will Arrive

“How are things going, other than this catastrophic market?” my dad asked me over the phone recently.

My dad’s had a remarkable career. He worked 30 years and retired as an electrical engineer. His dedication paid off…

He has secured a pension that’ll pay out for the rest of his life. So for the most part, his financial needs are covered.

Today, he gets to spend time at his leisure. And one of his hobbies is following the markets with a close eye.

Yep… My dad is now a market watcher. He tunes in on a daily basis. And the constant news coverage of the crash has him spooked.

“The Dow Jones is down more than 1,000 points today,” he continued over the phone. I could hear the underlying fear in his tone.

It’s bad out there. Both the Dow and the S&P 500 recently suffered their worst one-day declines since the global financial crisis.

People like my dad are spooked… But I haven’t seen that fear spread to non-market watchers just yet. That tells me the bottom in stocks likely isn’t here yet.

Let me explain…

Yes, my dad is worried today. And I’m sure if you’ve tuned into the news lately, you are too. But the fear hasn’t reached folks who aren’t following the market on a daily basis.

In fact, I’ve gotten several texts from friends asking me the opposite question… “Is it time to buy?”

I’ve also gotten multiple messages asking, “Hey, are you taking advantage of this market fall?” in some form or another.

Heck, I even have a buddy who’s buying call options (betting on stocks to go up) right now. Sure, a few trades will probably go his way. But whether he is right or wrong isn’t the point. The point is this…

Market bottoms don’t happen until folks reach the point of maximum fear.

It’s my friend’s sheer confidence that stocks are going to take off that should concern you. He thinks the current downtrend is an opportunity. And most other non-market folks I’ve spoken with feel the same way.

Sure, for you and me, it’s scary. But we keep up with this stuff. We understand that the fears are justified. But more normal folks are tuning in because they think they can make a quick buck.

When the real bottom arrives, these guys will want nothing to do with the markets. Their thought then won’t be: “Is it time to buy?”

It’ll be: “I’m never touching stocks.”

That’s the sentiment you see at major market bottoms. And that’s when you want to step up to the plate and buy.

While we are seeing fear enter investors’ minds… it’s not there for regular folks just yet.

Combine that with the clear downtrend in the market, and it means that now is the time to be patient. Refresh yourself on your current investment plan. Follow your stops and live to fight another day.

The sentiment you’d expect at the bottom isn’t here yet. When that changes, you’ll want to be a big buyer of U.S. stocks… and not a moment sooner.

Good investing,

— Chris Igou

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Source: Daily Wealth