In our January commentary, we said,

For new clients, or clients putting additional funds into their accounts, we’re scaling your money into the markets 1/3 at a time. However, we would accelerate the plan if stocks pulled back 10% or more."

More recently, David Edwards commented to Liz Claman of Fox Business News that even though US stocks were making record highs, Edwards had that "walking on thin ice feeling."  

Two weeks later, investors experienced quite the cold water dunking, with US stock giving up all the gains of 2020, and international markets sinking into the red.  The triggering event was wider spread fears about Coronavirus.  Our evaluation of January 29th remains the same: there will be short term economic disruption, not enough to change our investment strategy.

It may seem counter-intuitive, but we regard pullbacks like these as necessary and healthy for the stock market, even if there is short term pain for our investors.

Recently, a prospective client breathlessly scheduled a meeting at our firm. His story: he had invested the proceeds of a $200K life insurance settlement in Tesla call options, now worth $2 million, and wanted to know what to do. Our advice, take profits on 90% of the position, keep playing with the remaining 10%. The prospect promptly ran out of our office - what he wanted to hear was, "You're a genius! Double down."

When we see situations like this, we have the same reaction that a veteran ski patroller must have when he or she sees an inexperienced and untrained skier venturing into avalanche territory - "That skier is gonna die!"

Generally speaking, when amateur investors think professional investors are idiots, the market is due for a fall (see Bitcoin, Internet Bubble, etc).

For the last 13 months, stocks have gone up unchecked, delivering three years of return in one year. US stocks fell 4.9% in the previous week, and we would not be surprised to see stocks fall another 5% for a total decline of 10%. We're not selling stocks at all right now. We are looking to move our newer clients that are still mostly in cash further into stocks - not this week, but within a few weeks.