The Club has taken a restrained approach to the oversold stock market in recent days, making only one purchase after an assertive buying spree the previous week. In a volatile market, sometimes investors’ best course of action is to do very little or nothing at all. Our only purchase this week came on Monday. We picked up another 25 shares of Pioneer Natural Resources (PXD), at about $185 each, after the stock fell about 6% from our last buy on March 13. This week’s one-off buying contrasted with a busy week of buying for the Club in the week ended March 17, when we added eight stocks to take advantage of the turmoil caused by the banks . Banks’ concerns following the collapse of Silicon Valley Bank (SVB) two weeks ago have not gone away. In fact, fresh concerns arose Friday around the health of German lender Deutsche Bank. But, in the end, the details of the past week – including a hike in Federal Reserve interest rates and major market moves – prompted the Club to be smarter with our money. This was the case even as our trusted S&P 500 short-range oscillator continued to signal an oversold market, often suggesting stocks could rebound. Anticipation of Wednesday’s Fed rate decision hung on Wall Street at the start of the week. The central bank’s 25 basis point rate hike was widely expected, but there was no way to know how the market would interpret Fed Chairman Jerome Powell’s subsequent remarks. Given this uncertainty, it didn’t make sense to step in and buy stocks until the Fed’s path was clear. The shares proved difficult to read on Wednesday, hitting session highs at the start of Powell’s press conference, before falling and selling sharply. The S&P 500 fell 1.65% on Wednesday, a decline partially attributed to Treasury Secretary Janet Yellen who said she had not considered “blanket insurance” for all bank deposits following the failure of three US lenders in March. Yellen appeared to change his stance on Thursday, telling Congress that regulators could take additional steps to ensure deposit safety, if needed. Markets could remain choppy in the absence of clear universal deposit coverage above the current Federal Deposit Insurance Corporation (FDIC) limit of $250,000. In volatile times, we also like to avoid buying when stocks are up in one day. This explains our inaction on Thursday as Wall Street soared to start the day. The S&P 500 and Nasdaq Composite traded up 1.8% and 2.5%, respectively, before pulling back in the afternoon. The fact that the market is in oversold territory is not the only requirement for the Club to invest money in a stock we like. We also want the stock to be priced lower than our last purchase. Take Halliburton (HAL), for example. A week ago, we bought 130 shares, at $30.15 each, after Halliburton fell about 13% in just a few days. The oil services company continues to trade at an attractive level on Friday, at around $29.50 per share. The problem is that this level is too close to our March 17 long. Typically, with an undervalued stock like Halliburton, we’d feel better trading around 5% less than our last buy. As Jim Cramer often says: discipline trumps conviction. Conclusion Investors should always consider the big picture when determining whether it’s time to put their cash to work. For the Club this week, the facts on the ground call for a little more caution. The post-Fed market whipsaw, combined with Yellen’s wrinkle, partially validated our approach adopted since Monday. Another consideration is that the S&P 500 is on track to end in the green this week, although newsflow around banks has tended to be negative. We ensure that stocks strengthen when there is so much volatility and uncertainty. (Jim Cramer’s Charitable Trust is long PXD and HAL. See here for a full stock listing.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
Traders work during the New York Stock Exchange (NYSE) opening bell on Wall Street in New York on August 16, 2022.
Angela Weiss | AFP | Getty Images
The Club has taken a restrained approach to the oversold stock market in recent days, making only one purchase after an assertive buying spree the previous week. In a volatile market, sometimes investors’ best course of action is to do very little or nothing at all.
cnbc
Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
Rana Adam25/03/2023
