Friday was the crowning moment of a bad week. Caterpillar came in with weak earnings and fell 5%. Such a stalwart collapsing was enough to fold weak hands on the anniversary of Black Monday 20 years prior. Forecasters of gloom raised their arms in victory as the Dow shed 2.6% for the day.
I wrote last month that we would not see another Black Monday, and we haven’t. Some disingenuous pundits are using Friday’s sell-off to claim prescience in warning us of an impending repeat of 1987. Please. Twenty years ago, the drop was 23% in a day. Friday’s 2.6% drop is fairly routine. Anybody in this business knows that and should not exploit the coincidental timing to capitalize on fears.
Another idea I wrote last month was that any weakness this month would be the opportunity for latecomers to finally join the rally underway. I still feel that way. We have weakness, so now’s the time to get into the market if you haven’t already.
Look carefully at the reasons behind last week’s drop: sub-prime, high oil prices, declining dollar, economic uncertainty, accusations of a befuddled Fed. Do you see anything new there? No. It’s the same bear list we’ve seen for a long time. New fears — unforeseen — would be greater cause for concern because big drops are usually surprises. Last week was just a normal amount of market shakiness. It’s weakness that should be bought. It’ll probably persist a little longer, but is nothing cataclysmic.
Keep your perspective here. The market stepped down three rungs on a tall ladder that’s gone almost vertical for two months. The dizzying heights have been reduced, but the ladder is still in place and the climbing will resume.
Look insideThe Kelly Letter
Your email is never published nor shared. Required fields are marked *
You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>