- Morgan Stanley’s Business Condition Index (MSBCI) experienced a sharp drop of 32 points for May.
- President Trump pushes the Fed for rate cuts.
- Next week in The Rich Investor, Charles Sizemore will be taking over to cover how to invest during a bear market.
Value stocks trading at the largest discount ever. Some believe the strategy might as well be dead.
Charles Sizemore doesn’t necessarily see these times as the death of value investing. In fact, he believes there is still great utility in trading value stocks.
Asked last week how he felt about this supposed death of value investing, he wrote back:
It really is the 1990s all over again. Back then, it was ridiculous tech startups with no path to profitability — remember the Pets.com sock puppet? It was trading at “price to eyeballs” valuations.
Today, it’s money-losing “unicorn” apps with not path to profitability… not to mention cryptocurrencies that few speculators actually understand.
In the 1990s, value investing was dead. That decade saw the death of Julian Robertson’s hedge fund and the near death of George Soros’ hedge fund due to clients withdrawing their cash to chase growth. The only reason Warren Buffett wasn’t fired as a money manager was because Berkshire Hathaway was his own personal holding company and not a traditional mutual fund or hedge fund that can face redemptions.
Of course, we all know what happened next. Once the tech bubble burst, value investing came back with a vengeance and went on to crush the market for nearly a decade.
Elsewhere, it’s been a dicey market the past few months. Some indicators earlier in the year suggested that a slowdown is on it’s way. And now, amidst it all, the business conditions are failing.
According to Morgan Stanley, their proprietary Business Conditions Index (MSBCI) dropped 32 points in May. That’s the most severe drop seen since the index was first created, though the lowest point was hit in 2007-2008 during the financial crisis.
It’s an indicator that suggest business expansion in the U.S. is coming to an end, or at least slowing.
Couple that with the U.S.-China trade war, Trump’s push for rate cuts, which are now 84% priced into the markets without Trump’s help, a slowdown in jobs created for May, and the DOW, S&P 500, and Nasdaq all moved lowering at Friday’s close, things seem to be tightening up with the economy. What happens next is anyone’s guess…
Staying afloat in these turbulent times requires flexibility and adaptation. And a degree of patience… Most things in life are cyclical, and the markets are no different. As Charles mentioned yesterday, some variation of the dot-com bubble burst that gave value investing wind under its wings could be unfolding .
And there are ways to capitalize on this opportunity by creating a portfolio that is specifically flexible for these constantly changing market conditions. When the bear market comes, you’ll want to be able to profit off it.
Charles knows just how to do this, and next week he’ll take over The Rich Investor all week to share how the market is changing — moving into a potential repeat of the past — and why this flexible way to investing might be just what you need to thrive in the next bear market when it arrives.
So, tune in next week to learn more about this opportunity.