In baseball you don’t have to swing at every pitch – the same rule applies when it comes to your money.
In three weeks-time, some 16 million people have filed for unemployment claims, which is roughly 10% of the labor force. Yet, the S&P 500 returned 12% last week for its best weekly return since 1974. So, what gives?
Is the market optimistic about an economic upturn? Is the market optimistic about the amount of stimulus coming from both the Federal Reserve and the U.S. government? Or have we been so conditioned post-financial crisis to buy the dip, in a trade that has worked so well over the past decade that we stick to it? Or is this just a bear market bounce?
Whatever the answer may be, we don’t have to swing at every pitch. We can pick our spots. Just as we say don’t panic sell, you also don’t want to panic buy either. This is a time to be disciplined and to stick to your base case. Don’t performance chase, think long-term. Take in the every changing facts and make systematic, thoughtful decisions. Don’t sell just because others are selling and don’t buy just because others are buying.
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