CMG Capital Management Group CEO writes about strategies for this new volatile market in his latest Forbes article titled Welcome To The Opening Round Of The New Bear Market. Some excerpts from the piece:
“My view: it’s time to “sell the rallies” or use rallies as an opportunity to hedge. The fundamental evidence (valuations, growth, profit margins) and the technical evidence both look weak. From a technical perspective, this jolt to the equity market is the first shock and marks the beginning of a new cyclical bear market.
“I believe we are seeing the beginning stages of a bear market in the U.S. While the U.S. economy looks stable, it is time to keep a close eye on the risk of recession. Set your sights forward. This is also a good time to get reacquainted with the merciless mathematics of loss.
“Advisors manage portfolios to achieve desired needs. Nearly 75% of investable assets in the U.S. will be in the hands of pre-retirees and retirees by 2020 (research from Blackrock). That’s a lot of money that lacks the time needed to overcome a 40+% decline. Just hang on? That works well when you have a 30-year investment runway. It doesn’t work for the ageing baby boomer with a portfolio needing to generate a monthly income. Time to recover? The runway is too short for too many.
Here’s a few ideas. With risk elevated, look to hedge equity exposure and/or raise cash when the stock market rallies. We are now in a “sell the rallies” environment. There is a time to have 60% or more exposure to equities and a time to have just 30%. The idea is that you want to be in a position to buy more equities when the 10-year forward returns are better than 10%. A major market correction will bring you that opportunity – unless you are run over on the way to that buying opportunity.”
Full Forbes article: Welcome To The Opening Round Of The New Bear Market