Don’t Look Down! We’re Looking One Year Out and History Likes the View

The markets are just about untradable at this time. We are holding a lot of cash, and we will be patient. Believe it or not, this will pass. The volatility is extreme, and the movements have been breathtaking, but holding too much cash is also risky because all it will take is one tweet that one deal has been reached, and another 10% higher rally will happen in no time.

The market, on an intermediate-term and long-term basis, is way oversold and we think this is bullish.

According to Stansberry Research, the April 3-4 tumble is the fourth-worst two-day stretch in the market since 1950. Looking at the other top 10 two-day plunges, all occurred at the outset of genuine crises – the 1987 “Black Monday” plunge, the great financial crisis of 2008, and the outbreak of COVID-19 in 2020.

However, when one looks a year beyond these 10 other instances, the average return is a whopping 27.2%, with every single instance in the green, and the biggest one-year recovery at 59.2%. Look two years out, and the average return is 40.4%, with gains as high as 69.5%.

I wish I could say all is clear, but nobody, and I mean nobody, knows what to expect next. Once there is clarity, we still expect the market to move higher in the 3rd and 4th quarters.