Thank you!
Your support is sustaining the future of local news in our communities.

The market’s flash correction

The market’s decline has been one of the fastest in history.The fall has been fueled by the Trump administration’s economic policies. The question most investors are wrestling with is what to do about it.

Looking back on this period in a year or two, I guarantee that most investors will have trouble remembering exactly what happened. There is nothing abnormal in this decline thus far except its speed. It is a simple garden variety pullback, which occurs at least once a year if not more. It is the price of doing business for equity investors and savers with tax-deferred retirement accounts.

Given that, the decline is probably a good thing for an over-extended market on the upside. Stocks normally take the escalator up and the elevator down.In the pain game, I believe fast is better than slow when dealing with the emotional side of investing. Hopefully, the markets will bounce before too many more negative emotions surface.

I say that because emotions are your greatest enemy when investing. It would be a rare reader indeed who isn’t feeling worried and stressed right now when dealing with the market. The S&P 500 Index is down more than 10%, NASDAQ ­­­—17% and the Russell 2000 —18%.Is it time to bail?

No. The time for that decision is past. A month ago, taking some off the table may have made sense. Today it doesn’t.‘But what if it goes down even more?’ Let it, at worst you are halfway through a 20% correction but more likely on the eve of a turnaround.

Tom Lee, the founder of FSInsight, and a frequent guest on CNBC, reminds us that since 1928 going to cash and missing the 10 best days in a year reduces returns from 8% annually to —13%.

September 2022 was the last time investors were this pessimistic, according to the American Association of Individual Investors (AAII).

At the end of February, the proportion of investors identifying as bearish reached 60.6%.Historically, when this has occurred, the average subsequent 12-month return has been 24%.

How can you resist that desire to sell? Stop looking at your accounts. Watching your portfolio daily in a down market is behavioral suicide. Don’t do that.

So enough with the pep talk. Instead, the market had some good news last week for a change. The Consumer Price Index (CPI)and the Producer Price Index (PPI) came in cooler than most expected. I say ‘most’ because my forecast of weaker inflation numbers proved accurate. Next month’s data will show a 2.4% CPI, which will be weaker again. The following month should show a decrease as well. However, given the markets’ focus on tariffs and Trump’s economic policies, the inflation news did not matter to investors.

I expect the unemployment rate will rise as the administration reduces the number of the 3 million federal government workers. If you combine that trend with a slowing economy that is also being engineered by President Trump and his motley crew, we will have developed a perfect storm. That will provide a gateway for the Federal Reserve Bank to begin cutting interest rates once again.

Remember the Fed has two areas of responsibility: fighting inflation and maintaining employment. Chair Jerome Powell has already stated several times that the Fed now considers employment the focus of monetary policies. The bond market is already betting on a rate cut as early as May or June, with more to follow. That should be good for the stock market, which usually begins to discount events six months out.

The latest University of Michigan consumer sentiment numbers dropped another 10% in March.Trump has now admitted his policies will cause at least a slowdown in the economy, higher unemployment, and as for inflation, who knows?

As for the overall market, it is Trump-dependent, and the president has shown that he is no friend of the stock markets. Wall Street strategists and technicians are looking for at least a dead cat bounce.


Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires.

The views expressed here are not necessarily those of The Lakeville Journal and The Journal does not support or oppose candidates for public office.

Latest News

Recovery underway after July 4 storms devastate Northwest Corner

Ben Blackwell directs traffic in Salisbury as motorists navigate road closures caused by fallen trees.

Patrick L. Sullivan

This is a developing story.

After a series of extreme storms pummeled the Northwest Corner late July 4, communities are picking up the pieces and offering support to those affected by blocked roads, downed power lines, and power and water outages.

Keep ReadingShow less
Storms rip through Northwest Corner on July 4, stranding travelers, closing roads and knocking out power

A blocked road on Route 41 in Salisbury looking north at Cobble Road.

Patrick L. Sullivan

Updated July 5, 10:00 a.m.

What began as a picture-perfect Independence Day took an abrupt turn Saturday evening, as powerful thunderstorms and possible microbursts swept across the Northwest Corner, bringing down trees and power lines, closing roads and leaving many residents unable to reach home.

Keep ReadingShow less
Kent's Fourth of July plans change due to heat, potential storms

The Veteran’s Memorial is set to receive a new plaque commemorating Kent’s 44 known Revolutionary War servicemen. The stone will be displayed throughout the weekend’s USA 250 celebrations.

Alec Linden

KENT – Kent organizers made last-minute changes to the town's Independence Day celebrations due to extreme heat and possible storms, bringing some activities inside and making slight changes to the parade. Fireworks at Lake Waramaug are planned as scheduled.

Members of the town’s USA 250 Subcommittee made the changes during a July 1 after the National Weather Service issued an extreme heat warning. With temperatures expected to reach the low to mid-90s, Gov. Ned Lamont also activated Connecticut's Extreme Hot Weather Protocol on Tuesday, which remains in effect through Sunday.

Keep ReadingShow less
google preferred source

Want more of our stories on Google? Click here to make us a Preferred Source.

E. Jean Carroll backs out of book-signing event at Hotchkiss Library for safety reasons

The Hotchkiss Library of Sharon will host its 28th annual Sharon Summer Book Signing event July 31 through Aug. 2.

Aly Morrissey

SHARON – Facing threats of violence amid a public dispute with President Donald J. Trump, famed author and journalist E. Jean Carroll is no longer expected to attend a highly anticipated book-signing at The Hotchkiss Library of Sharon, though library officials said they have not received formal notice that she has canceled.

The meet and greet was originally scheduled for Aug. 1 as part of the library’s Sharon Summer Book Signing event – which will take place as planned – but Library Director Gretchen Hachmeister said July 2 that Carroll’s attendance is no longer expected. She said the writer is allegedly in an undisclosed location under police protection after receiving death threats related to a recent Supreme Court decision and the president’s subsequent posts on social media.

Keep ReadingShow less

HVRHS Announces Senior Awards

HVRHS Announces Senior Awards

Senior awards for the HVRHS Class of 2026 have been announced.

Nathan Miller

The Housatonic Valley Regional High School senior awards were announced for the Class of 2026. The graduation ceremony was held Friday, June 19. Student speakers acknowledged the importance of community, as several reflected on overcoming significant adversity in their young lives.

Norma Lake Award - Shanaya Duprey

Keep ReadingShow less

The nature of Upstate Art Weekend

The nature of Upstate Art Weekend
Opening of Upstate Art Weekend at Olana with Helen Toomer, Ellen Harvey, Jean Shin and Gabriela Salazar
D.H. Callahan

On Thursday, June 25, a collection of eager art enthusiasts gathered at Olana State Historic Estate in Hudson to kick off the seventh annual Upstate Art Weekend (UAW).

Helen Toomer, founder, was joined by sculptors Ellen Harvey, Jean Shin and Gabriela Salazar to discuss their work and the legacy of painter Frederic Church. Church, whose 200th birthday is being celebrated this year, is widely credited as one of the founding members of the Hudson River School of painting. The discussion took place at Olana, Church’s grand estate, where the three artists’ installations are on view.

Keep ReadingShow less
google preferred source

Want more of our stories on Google? Click here to make us a Preferred Source.

google preferred source

Want more of our stories on Google? Click here to make us a Preferred Source.