The market had an awesome month last month. The S&P and the Dow were partying like it was 1999—or rather, 1987, which was the last time the market hit such highs in January. And 1987 was quite a year. After that spectacular January, the market had a few ups and downs, but the S&P essentially stayed flat until the end of May. Then the Dow plunged in October, and on October 19th, 1987, the Dow fell a record 22 percent in one day. That day, which later became known as “Black Monday,” was the worst day in one of the most historic bear markets in the United States.

So the fact that this January is as good or a bit better than the one in 1987 does not make me waver in my advice that investors should be in protection mode. Plus, the Fed recently said they won’t raise interest rates as quickly as planned. The announcement made the stock market happy—news about “cheap money” typically does. But I don’t believe the announcement is necessarily good news. If the economy is great and everything is wonderful, wouldn’t the Fed continue to raise interest rates? Historically, the Fed tends to lower interest rates (or decides against planned raises) in recessionary times, not in bull markets. I think the Fed’s analysts looked at the data, realized that the economy was not as good as they’d thought, and decided to backpedal a bit.

I believe there is a lot of risk in the market right now, and that the downside is greater than the upside. That’s why we pulled our clients out of equities and advised others to do the same. We made that call on December 17th, 2018. We made a similar recommendation in November 2007, and those who followed our advice then protected themselves from big losses in 2008.

I think we need to be cautious right now. We’ve had a fantastic run, so it’s prudent to consider protecting what you’ve built.