Last Chance to Buy in While Dow is Under 25,000

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The window of opportunity to buy into the U.S. stock market while the Dow Jones (Dow) is under 25,000 is open again.

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There is no telling how long this will last. It could close today or be open for years.
In 1987, I could have said the same thing about the window to buy was open to buy in with the Dow under 2,000 after the market crashed on Black Monday.
The fall of 2008, the Dow swooned below 10,000 after peaking at near 14,000. A window to buy under 10,000 stayed open for a while as the stock market continued its fall allowing buyers to jump in under 7,000 for a brief time.
The drop we have seen this February is a much smaller percentage (so far), but it is creating an opportunity for long-term investors.
“Long-term investors” should be considered an oxymoron. If you are a buyer of stocks and not in it for the long-term, then you are not an investor, but rather a “speculator”.
Which are you?
This market downturn was long overdue as the stock market has been on an amazing ride since in bottomed over a decade ago.
It literally went up well over 250% in the past decade, so should a 10 -20% pullback be that big of deal? The answer is “yes” for speculators, but “no” for investors.
Look at how small this correction is in context with the growth the past 9 years.

 

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Believe it or not the impetus for the selloff (re-pricing) is that the economy is doing too well too fast.

The amazing new economic growth measured by a 50% increase in GDP (going from 2% to 3% annually) is very exciting news. Unemployment at all-time lows. Tax reform law helping business and in turn helping people with raises and bonuses. This good news and that the Federal Reserve is jumping in to slow it down so that inflation doesn’t jump up too much. Meaning this is pushing up bond interest rates. And hurts bond prices in the short-term, but helps in the long-term for fixed income investors.
With new bonds offering higher interest rates, it make them more relatively more attractive compared to stocks. This drives a repricing of stocks to get in line with the bonds.

Getting back to the opportunity to buy stocks today.

If you don’t sell out, I consider that the same as buying, because you are choosing to be an owner at current prices. Buying today means shifting money from non-stock investments into stocks. This will be rewarded long term too.

The Dow will hit 100,000 in my Lifetime

This is not a magically crystal ball prediction, but rather just simple math. Believe it or not the Dow dipped to 1750 back in 1987. That means in 30 year it went from 1,750 to 26,000, that almost 15x in 30 years. If the next 30 years the Dow went up 15x from today’s 24,000 level that would put it 360,000!
For no logical reason you assume the outlook for the next 30 years is nowhere near as bright as the past 30 years and assume the DOW growth is fifty percent worse than the prior 50 years – The Dow goes to 180,000 in thirty years!

This is why I am very confident you will see 100,000 and then some in the long-run. If that’s the case, does it matter if you bought in when the stock market was at 26,000, 24,000 or 20,000?
dont panic on dowjones
Some other reasons for investors not to panic:
• The Dow was at this level 3 months ago. Yes, we have fallen back to that level very quickly, but this is just opportunity.
• If you sell out, how will you know when to buy back in? You sell and plan on buying back in you are a speculator? Need your money back in the next few years, your money doesn’t belong at risk in the stock market?
• As I mentioned earlier, stock market corrections are normal and healthy, the point drops are much larger now because of the higher market level, but the percentage of drop is not necessarily
• In order to hopefully obtain the long-term stock market rewards you have to be able to stomach the volatility that goes with it. In 2017, the market rise was paired with the least volatility on the downside ever. This means we all got a free ride going nothing but up. This may have caused so complacence.
• Lastly, you’ve been coached not to panic by your advisor. Shockingly to many, my phone has not rang even one time with client concerns about this drop.
I hope this helps calm any fears you may have had. Be an “investor”, not a “speculator” and go about your business.

You May want to Check out…

This Just a Correction

 

Bond Prices at Nose-Bleed Levels – Public Jumps in With Both Feet

DOW nears 17,000; Where’s the Euphoria?

 

 

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4 Comments

  1. I’d be surprised if it doesn’t hit 18,000 in the next two years but I’m also buying stocks and index funds every month regardless of market prices. I don’t have any speculator in me but a lot of investor.

    • Anybody still adding money to the stock market should cheer a bigger stock sale. I don’t pretend to know how big the sale may end up being.

  2. Excellent Commentary Brad.
    History rewards the long term investor with a smart, diversified portfolio—always.
    The more things change, the more things stay the same.

    • Thanks Rob, not always easy to overcome the fear that comes with a temporary drop in account balance. The media usually doesn’t help as it highlights gloom and doom.

      Stay on your path, don’t listen to the noise.😉

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