WHAT TO DO NOW: The market continued its crash today, with the major indexes losing a bunch more ground on virus-related economic fears. We came into today with two-thirds of the Model Portfolio in cash, and tonight we’re going to sell our remaining small position in ProShares Ultra S&P Fund (SSO), giving us a bit more than 70% on the sideline. Details below.
It was another brutal day on Wall Street, with ever-heightening fears over the economic impact of the virus leading to a huge down day. At day’s end, the Dow had lost nearly 3,000 points and the Nasdaq was off 970 points (12.3%).
There’s really not much to say except the obvious when it comes to the market: We remain in a rolling crash, and while we’re seeing many historic extremes (both price and sentiment), we need to see the market get off its knees for at least a couple of days before thinking a workable low could be in place.
As for actions, we came into the week about 67% in cash, so we’re not eager to throw stuff overboard at this point. The exception, though, is our remaining small position of ProShares Ultra S&P Fund (SSO), which sunk with the market today and is violating our loss limit. We sold one-third of our position back in late January, and half of what was left last Friday. And today, we’ll let go of the rest, which will give us a cash position just over 70%. SELL YOUR REMAINING SSO.
As for our few remaining positions, we’re watching them closely and are willing to do more selling if this crash continues. The good news is that the Model Portfolio is still hovering just south of breakeven (down less than 2% in 2020), even as the S&P 500 is down more than 26% this year. Thus, we’re willing to give them a little rope, especially as most remain relatively resilient compared to the market.
As always, we’ll be on the horn with any further changes if need be. Don’t hesitate to email (mike@cabotwealth.com) with any questions; we’re here to help in these crazy times. Your next scheduled message is an update this Thursday, March 19, but of course we’ll send special bulletins as needed.