Pro’s Message to Investors: Don’t Don the Parachute

The market may be volatile these days, but S&P Capital IQ’s Sam Stovall has a piece of advice for investors—hang in there.

“Who knows how deeply we’re going to decline, with so many investors claiming that they wish they had more of their portfolio exposed to equities,” Stovall said.

Stovall believes the S&P 500 is moving back down to the 1,595 to 1,600 level as investors take short-term profits after the recent rally. However, he said it could wind up being a shallower decline than he expected.

But even if his predictions come true, he added, “it usually takes about two months on average to get back to break even,” he added. “So, you’ll probably miss it.”

(Read More: Don’t Time the Market: Schwab CEO)

He also doesn’t put too much stock in some patterns, like the Dow’s 20-Tuesday winning streak that was snapped this week. He equates it to “interesting cloud patterns” that hang around for a while and then eventually dissipate.

However, he thinks old adages like “sell in May and go away” are more seasonal in nature and have some reason behind them. So what should an investor do?

“If history says that volatility is approaching, then pretend you are listening to a pilot who says, ‘fasten your safety belt,’” Stovall said. “They’re not saying ‘don your parachute and assemble by the door.’ … Don’t become your portfolio’s worst enemy.”

This entry was posted in Analyst Interviews, Investing. Bookmark the permalink.

Leave a Reply