WHAT TO DO NOW: Remain defensive. The market took another leg lower today, though our four remaining stocks in the Model Portfolio hung in there. We continue to hold a big cash position (near 71%) and are aiming to preserve capital until the crash ends. We have no changes tonight.
The market’s historic unraveling continued today, with the major indexes suffering another massive selloff—at day’s end, the Dow was off another 1,338 points and the Nasdaq had lost 345 points (4.7%).
At some point down the road, there will be time to study this crash, but right now our job is to stay defensive and respect what’s going on. There are certainly enough crazy extremes to put in a workable low (and a meaningful rally), but this is obviously a once-in-a-lifetime event, so the key is preserving capital and confidence.
In the Model Portfolio, we came into today with 71% in cash, which is obviously a good-sized cushion from the wild volatility. And we’re happy that our four remaining positions are acting resiliently and/or are holding near logical support (such as a 200-day moving average). As we’ve written before, we’re not craving more cash, but we’re watching things closely and will prune further if our stocks give up the ghost.
As for rays of light, we find it interesting that the number of stocks hitting new lows actually peaked last Thursday (around 4,400 combined on the NYSE and Nasdaq); this Monday’s plunge and today’s drop to lower lows saw fewer stocks participating in the downside.
That’s not a reason to get bullish, but it’s worth noting that, for the first time since the crash phase began, the broad market is at least beginning to resist the selling tsunami. We’ll see how it goes.
After today, the Model Portfolio is actually right at breakeven so far this year, which obviously compares favorably to the 25% horror show for the S&P 500. Tonight, we have no changes, but we wanted to touch base given the market’s movements. We’ll have our regularly scheduled update tomorrow (March 19) after the market close.
Don’t hesitate to email (mike@cabotwealth.com) with any questions; we’re here to help in these crazy times.