The first trading session of 2021 got the new year off to a rocky start. The S&P 500 shed 1.5% in the biggest daily decline since late October.
Election uncertainty is flaring up. A super version of Covid-19 is spreading across the U.S. England is going back into lockdown. And the vaccine rollout is progressing far slower than planned. In all, it was a dreadful weekend for headlines.
But none of this should surprise anyone. The news has been dreadful for ten months and this latest spurt is nothing new. Stocks didn’t rally to where they are because our environment has been good. They got here because the future is a lot brighter than the present.
It’s common knowledge stocks are priced for what investors expect in six to twelve months. And so the question we have to ask ourselves is if anything that happened this weekend changes this six to twelve month outlook?
By this summer, the election will have long since been settled. Even with this slow vaccine rollout, most people who want a vaccine will have been given one by this fall. Or at the very least, the vulnerable populations and essential workers will be inoculated, allowing the rest of us to resume our normal activities without putting other people at risk.
If anything, this latest headline brouhaha increases the urgency for another round of stimulus. And if there is anything we learned from 2020, at least as far as the stock market goes, stimulus trumps everything else.
Monday’s selling could continue into Tuesday and even Wednesday. But this is nothing more than a minor wobble on our way higher. Two-steps forward, one-step back. Nothing meaningful changed this weekend and the prior uptrend remains intact. Any near-term weakness is giving us a buying opportunity, not an excuse to abandon ship.
As always, respect your stops. But if you get stopped out, be ready to jump back in as soon as this proves to be a false alarm. This latest dip will rattle nerves but it will also bounce far quicker than anyone expects.
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Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.