Investing In A Sea of Red

After a rough few days for my individual stocks last week, I was actually feeling optimistic about the market this morning. Then the bell rang.

If your portfolio is anything like mine, you’re staring at a sea of red right now.

It’s frustrating and disappointing, but at least we can all take a little comfort in knowing we aren’t alone.

In my usual scouring of the news, I found some interesting tidbits of comfort in this article.

According to Mike Wilson, chief investment officer at Morgan Stanley, buying the dip at the moment isn’t gonna work.

“Buy the dips” means purchasing an asset after it has dropped in price. The belief here is that the new lower price represents a bargain as the “dip” is only a short-term blip and the asset, with time, is likely to bounce back and increase in value.


“After the Evergrande dip and rally, stocks have probed lower and taken out the prior lows, making this the first time that buying the dip hasn’t worked, simultaneously violating important technical support,” Wilson said.

SOURCE: Market Watch

One other interesting note is the sectors Wilson mentions as less likely to tank in these conditions.

As for what to do with all this, Wilson said the team has favored a “barbell” of defensive sectors — healthcare and staples that should hold up as earnings revisions start to see pressure from decelerating growth and rising costs. Add financials, which benefit from a rising interest-rate environment.

Consumer discretionary stocks, meanwhile, are “especially vulnerable to a payback in demand from last year’s overconsumption.” In that realm, Wilson likes services over goods for pent-up demand remaining, while some tech stocks are at risk from a work-from-home dynamic that’s fading. Semiconductors are the biggest worry, he said.

Buy the dip has failed. Here’s what investors need to do next, says Morgan Stanley.

I can echo this sentiment. My biggest loser at the moment (down nearly 20%) is in the consumer discretionary sector while my smaller loses are in healthcare stocks.

I am not a stock market expert, but I think the outlook for this week and possibly even this month is looking bleak.

I’m going to keep a very close eye on my consumer discretionary stock and consider pulling the trigger on a sell when I’ve had enough of the loses. I will give the healthcare stocks a little more time to straighten out.

Either way, taking a less aggressive and more defensive posture for the next little bit seems to be a wise move. There are many factors in play at the moment that can cause a downturn in the market. In my view, It would be wise to lower the risk at this point.

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