No Moves This Week: Planning for Future Volatility

With the 2020 presidential election mere weeks away, we can expect significant volatility in the stock market in the coming days and weeks. Accordingly, I’m making plans for both up days and down days.

In September, the S&P 500 sold off a little more than 10% in a garden-variety correction, so I’m using the levels where my Investments in Play portfolio found support as initial buying targets. You can see my current buying price targets for all three of my portfolios – Investments in Play, Speculation in Play, and the Pandemic Portfolio – on the Stock Shopping List which I update nearly daily.

As always, I Buy in Stages which means my next buy is never my last buy in a stock; I always leave cash on the sidelines in case we see a more extreme selloff.

Some analysts suggest the market is due for a generational 90-year selloff, arguing that the -35% drop we saw in March 2020 wasn’t significant enough to qualify. These analysts refer to data stretching back into the 17th century where an historic selloff of 50-75% occurs every 90 years.

When was the last generational selloff? 1929. Add 90 years and you get a target date of, you guessed it, right about now.

That being said, my approach to long-term investing has always been one of moderation. If you subscribe to the 90-year selloff theory, sell all of your stocks, and the market skyrockets from here, when do you get back in? Do you ever trust the market again?

For me, I like to play both sides and have plans for when the market goes up and when the market goes down. Sure, I’m not avoiding all of the downside risk with this strategy, but I’m also not missing out on all of the upside.