Some clients called me this week. Different people, same question. Should we sell? I understand why they asked. Less than two weeks to the midterms, and the volatility we talked about has arrived. It was on time. Nice when something in this market is.
One client pointed out that the CNN Fear & Greed Index is in “Extreme Fear.” The last time it went there was when the war broke out early this year. I told him that means investors are now as scared of an election as they were of a war. He did not laugh. Fair enough. It is his hard-earned money.
I told them what I see. The selling is broad. Good companies, bad companies, everything is going out the door together. Nobody is reading the label.
The reason is simple. Control of Congress is up for grabs, and trade, tax and spending all depend on the result. Markets do not like waiting for results. Neither do I. I do not sell my holdings over it.
Then I gave them some history. October in a midterm year has a bad reputation. By Christmas it usually deserves a better one.
One client asked if this time is different. Maybe. Every time is a little different. The world is bracing for a new war in the Middle East. That could push oil prices above their USD120 peak earlier this year.
Yeah, some of them have heard me on the buffalo jump before. The herd runs, nobody looks down, and the strong go over the cliff with the weak. The buffalo never learn. Investors are supposed to.
So this is what I told them to do. I run different models for different risk profiles. Check what you own. If the business is fine, hold. If the price has fallen well below what the business is worth, buy more. Do not join the stampede. It is crowded and it ends badly.