Looking For Opportunity Within The Fear
The early summer rally we saw has completely reversed, bringing us back towards yearly lows.
Statements for Q3 and into year-end are likely to look awful for pretty much everyone, as there has been nowhere to hide in this market.
Just about everyone is negative right now, and the CNN Fear & Greed Index is showing an "Extreme Fear" reading.
So have we reached peak pessimism?
Searching for Opportunity during Capitulation
In the investment world, market capitulation is when investors simply start selling everything in response to maximum pessimism in risk assets. Historically, it has usually taken a combination of many things to get investors so nervous about the future, that they decide its better to lock in losses to preserve what you have.
The problem is that once you get out of the market, it's almost impossible to time when to get back in. This is why the average do it yourself investor performs so poorly over the long term. For clients who have engaged in proper planning, market capitulations are arguably the best times to leap frog in wealth by taking advantage of mispricing's brought about by panic sellers.
So is pessimism peaking? We don't believe the market has fully capitulated just yet, but we certainly seem to be getting closer. Understanding the game plan for taking advantage of the potential bargains before it happens is critical, and your investment management team will be busy looking for ways to add value during periods of extreme fear.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.