Hello, I’m Ken Moraif, and this is our weekly Market Alert video for the week ending October 1, 2021, the beginning of the fourth quarter. And, oh boy, do we have a lot to talk about!
Before we dive into it, I just want to give you a quick personal update. I finally got to meet my grandson, Nathaniel! Everybody told me that when you meet your grandchild and you hold them in your arms, that it transforms and changes your life. And I’ve been like, “Yeah, whatever.” Well, now I have to say, it’s true. It happened, and it’s a strangest sensation. When you hold that baby in your hands, it’s almost like there’s an energy connection between you. It’s almost like you blended into one, and it’s the weirdest thing. I’m sharing a picture here with you. I don’t know if you can see that very well, but that’s Nathaniel right there. He’s looking at me like, “Wow, you are a weird being!”
But that’s not what we’re here to talk about. Let’s talk about the quarter just ended, and specifically—what’s going on with this crazy market? September was the worst month for the S&P and for the stock market since March of 2020, which was the worst month of last year—March and April of last year with the pandemic. Why is this?
You guys may remember the old soap opera “As the World Turns?” Well, I’m calling this “As the pendulum swings,” okay? Investors tend to be emotional. We’re human beings, after all, so when things are going well, we’re optimistic. We’re looking into the future, and we’re seeing everything rosy. Investors tend to get very excited and start buying when things look good. When the markets are going up, they start buying more because it’s going up, and it feeds on itself. Then the pendulum swings all the way, and at some point, it becomes “irrational exuberance,” as Alan Greenspan once said. That means the market basically overshot and went too far.
Then reality sets in—as we’re seeing right now because the pandemic is not coming to an end. We first thought supply chains are not being filled as fast as we thought, and inflation is lasting longer than we thought. Now, suddenly reality sets in versus the romanticized, perfect vision we had of getting out of the pandemic thinking everything would be fantastic. When that reality hits, the pendulum swings back.
Inevitably, what happens in my view, is that it swings too far the other way because now people are pessimistic, and the markets going down. Investors are thinking, “ I don’t want to lose money, maybe it’s time to get out.” So we’re seeing it swing the other way. Now it tends to overshoot the other way. And when that happens, buyers say, “Wow, you know what, there are some bargains. I’m going to start buying!” Then it swings again.
The bottom line for us has always been—as you guys know—investors are looking at profits. Over time, what generally drives the stock market is the profits companies produce. The more profit a company has, the more valuable its stock becomes. If it starts to lose profits, or not produce profits, then its value could go down. Profit is what you look at, in our view. If you keep your eye on that ball, what you see is that the economy is healing. We do continue to see the issues that are slowing things down in the supply chain and with inflation, but we think those things should abate over time. They’re not permanent conditions. Even the CEO of Pfizer said a year from now, the pandemic will be over—we hope.
We think the things that are worrying people and causing investors to sell right now should soon abate. In our view, what is happening is the result of an emotional reaction—and some profit taking considering how much everything has gone up until now.
So, September was the worst month in a year and a half going back to March of last year, which was when the pandemic was announced, and the economy shut down. We feel this is the reflection of an overshoot, and the market went up too high based on valuations and profits. Now that the reality is set in, the pendulum is swinging back the other way.
Overall, we’re not overly worried about where things stand right now. We think this may actually be a buying opportunity—not an opportunity to panic and sell. But, we obviously always keep our eye on the exit. We always plan for the worst, so if this turns out to be a big bad Bear Market, we certainly have our strategy in place and we will get out and we will do everything that we can to protect you from major loss. That’s our goal.
As you know, growth is important—we want to grow your money. At the same time, we believe that protection is even more important. That is the philosophy of our Invest and Protect Strategy™. We want to give you peace of mind. Let us do the worrying for you, so you don’t have to.
We wish you well, and hope that all is coming up roses for you. Thank you for watching this video. By the way, please share this video with your friends, your business associates, your family—anyone you’d like. Also, be sure you subscribe to our channel, so you don’t miss anything.
We’ll talk again soon.