Wow! I wish I could get 10 minutes of my life back. When writing this, I was attempting to put Wednesday's drop into perspective by looking at a simple table of U.S. market indexes listing year-to-date performance -- and then I found this in the Wall Street Journal: wsj.com/market-data/stocks/us/indexes. It was a bit cumbersome, but did the trick.
This digression about the table is to show you that investment decisions should always be made with proper perspective. The markets are being absolutely hammered Wednesday, largely on Covid-19 concerns, but that's where the data is your friend.
Now, many of the products I attempted to use for a simple medium-term perspective on market levels give a 52-week performance for the major averages. But, raise your hand if you knew on Oct. 28, 2019 that 2020 would be the craziest year in decades -- so crazy in fact that "it's 2020" would become a catchphrase for anything odd. Put your hand down, you didn't know.
Well, neither did the markets, even six weeks into this year, in mid-February. So, that's why you have to manage your portfolio and the first tool is always information.
Checking your account balances everyday is a good start. You could scour the Internet for data and listen non-stop to the exalted geniuses (OK, I am being facetious) on America's second-most-watched financial news network CNBC, but, really only your account value should be important to you.
If you use a financial adviser, make sure that she is as laser-focused on your account as you are.
But don't panic -- and don't lull yourself into a false sense of security, either. I have been watching the markets in some professional capacity, including high school internships where I rode my bike to the office, for more than 30 years. I have never encountered a year like 2020. The divergence among the performances of the major indexes is truly unique in recent memory. And, in case you have forgotten, there is a presidential election next week. So, protect yourself.
In the past few days, I have bought some small positions in inverse exchange-traded funds (SQQQ) and (SPXU) for myself and my clients. Why protection? Turn on cable news if you have to ask that. It's a crazy world these days. Why small? Because, as always in a raging year for the markets, I am too damn long now. Relative performance is very important for active managers, and it is so easy to dump protective positions (I usually use puts and covered calls) when they just don't work. This was the case from May-September this year.
Well, as I say to myself often, snap out of it, and realize that risk exists. Money is free thanks to Jay Powell and his band of monetary snowblowers at the Fed, but there is a reason for that. Do not ignore 2020, and never, ever ignore valuation, especially when it comes to high-flyers, which this year have been mainly located in the Nasdaq.
Any wannabe gangsta possessing accounts with both Robinhood and Twitter (TWTR) can throw out wild performance numbers, but please realize that the best managers produce alpha (risk-adjusted return) in markets good and bad.
So, check the year-to-date performance figures from the Wall Street Journal for the numbers. Note that these don't comprehend the drastic reduction in earnings estimates that has occurred in 2020 ( the "e" in the p/e ratio) but accurately measuring current performance is the first step in maximizing future performance.