If you are invested in the stock market or looking to invest, I am sure the title of this article is on your mind. I will tell you the market on August 24th was more oversold than it was during the 1987 market crash. On August 24th the S&P 500 was trading more than five standard deviations below its 50 days moving average. This is an extremely oversold condition that usually indicates a short term bottom. The question now becomes is the bottom we made on August 24th a long term low or will we go back down and retest the lows. I will admit a couple weeks ago I thought we needed to retest the bottom to shake out the weaker investors. Normally, when this happens the market can regain steam and move higher. However, now I am in the camp that we are in the process of recovery and we have most likely seen the lows. If this is the case and you have the cash to invest you need to make a list of what stocks you would like to own. This is also a great time to make some changes and sell off your losers for a tax loss and reinvest into something with the better potential to make money over the next five years.
If you read my last article, I stated that market corrections are healthy and they happen more often than you think. Its times like these that you can really take advantage of mispriced securities. There are some bargains to be had if you do your homework. As I am writing this the Federal Reserve just decided not to raise interest rates. I think that because of this decision the market will have more volatility going forward. I also believe that the market wanted a rate hike and by not raising the Fed funds rate the market may react negatively over the next couple weeks. With that being said, now is the time to make your shopping list and buy solid companies with good long term growth potential.
You will have some great opportunities coming up and you don’t have to pick the bottom to be successful. Don’t let your emotions dictate your investment decisions. Do your due diligence and put your money to work. Over the next 3-5 years, you will be happy you invested during this correction. I encourage anyone reading this to visit our website at www.fogelcapital.com and read our blog. The topics covered are informative and it doesn’t cost you a dime to read. As always the opinions expressed in this article are that of the authors. If you would like to discuss this further you can reach us at (772) 223-9686.