Boy, This Market Momentum Rollercoaster Stinks

Market Momentum Rollercoaster

Are you panic selling yet? Because that’s what Wall Street wants. Today, market volatility kicked back into overdrive, and the Dow Jones has shed another 400 points. Whatever. If you’re a long-term investor, building a nest-egg, you should be using pullbacks and volatility as an opportunity. And if you’re retired and active in the market, you should be focused on income generation and less on the growth stocks that are getting kicked in the teeth today. Market momentum is negative again today after a daily crossover. Two-thirds of the universe of stocks are trading under their 50-day moving average. This market can’t shake instability. 

Despite today’s condition, I need you to have a long memory. Remember, historically, the market has an upward bias. More capital pours into the markets over time. Gains are achieved, and cash flow cycles back to shareholders. It is the same as it ever was. 

What we are experiencing this week is NOTHING compared to all of 2020. Last year, we had more than 40 days where the S&P 500 moved up or down 2% or higher. This year, the number is 5. This is not volatility. This is just uncertainty linked to another debt-ceiling draw out. But there are other problems that could create some tremors in the supply chains.

What’s Happening Today

We’re likely entering a very negative economic cycle because of supply chain problems. Over the last two weeks, I listened to forecasts from Nike (NYSE:NKE) and Costco (NASDAQ:COST). Both companies have experienced a doubling in lead times from their foreign supply chains. Costco is now renting its own ships to ensure that it has delivery of products through all of 2022. That’s bad news for mom and pop retailers that can’t access products ranging from electronics to clothing apparel. 

But if you want to understand the depth of the problem – look at McCormick & Company (NYSE:MKC). I know this company better than any Fortune 500 member. I grew up in it. This is a company that sells spices around the globe. They literally buy by the pound and sell by the ounce. And they came out today, beat earnings, topped revenue, and saw shares drop 2%. 

The problem: They are forecasting supply chain problems well into next year. If a company that procures spices – staples for home and restaurant cooking – is projecting supply chain problems, my concerns have just elevated from a 4 to a 9. 

But – wait – it gets better. China has jacked up energy costs on manufacturing facilities across the nation. Why? I’d love a clear understanding, and I’ll probably spend the day researching it. I could assume that it is highly political. But there is always another reason… and I’ll get to the bottom of it.

This is the time to be cautious and to use trailing stops in the event of a market pullback. But for now, we don’t panic. Tighten the stops, build cash for buying opportunities, and look to long-term trends in automation and more that will ultimately fix the global supply chains.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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