Here we are experiencing the dog days of summer and the stock market’s crazy price action remains red-hot.
In fact, through the end of June the S&P 500 Index has moved up-or-down 1% or more 68 times, or more than HALF of all trading days so far in 2020.
To be exact, 54% of all trading days so far this year have experienced this kind of extreme move.
But don’t let stock market volatility scare you away from making big money by taking full advantage of these up-and-down swings.
The truth is volatile markets can be your BEST friend. That’s because they can hand you multiple opportunities to cash in on the moves with fat profits. Here’s how.
You can see in the chart above, we’re already well beyond the average number of +/- 1% days. That’s the horizontal red line. And this is only through the end of June. Just halfway through the year.
At this rate, you can expect 136 up-or-down 1% days by year end. And we haven’t even reached the most volatile months of the year ... September and October. But does this spell bad news for stocks?
My short answer is NO. In fact, this kind of volatility typically leads to bigger gains going forward!
According to analysts at DataTrek research who studied the historical record, stock market gains are better than average following these +/- 1% days.
Going back to 1974 the data shows average S&P 500 gains of 8.2% in the three months after these extreme 1% moves, and 14.3% six months afterward!
Bottom line. While volatile up-and-down days can be unpleasant for investors to sit through, the fact is it typically leads to better-than-average stock market gains going forward.
Good investing,
Mike Burnick
P.S.: If you're curious about my favorite stocks to watch over the summer, check out my Fast Fortune Power Hour. It's a watchlist of a bunch of stocks I think could explode like fireworks over the next few months. Check it out!
Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. You may lose more than you invest. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. The information on this website is intended as educational in nature and we do not recommend that you buy or sell any specific financial instrument.
Post a Comment
Post a Comment