When asked what the market
would do, revered financier J.P. Morgan gave a famous -- and invariably correct -- answer:
"It will fluctuate."
Tuesday's market selloff -- the worst day for the Standard & Poor's 500 Index since 2012 began -- should serve as a reminder to investors of Morgan's market truth. As equities rise on a broad uptrend, as they have in 2012, it's easy to forget that they can also fall. Our optimistic exuberance for new gains evidently outguns our ability to remember sharp losses and long, slow or no-growth periods such as we've seen in the past few years.
Like most individual investors, I'm positioned to benefit from rising markets, so I don't like to see a broad selloff. On the other hand, I'm a long-term investor who makes conviction buys on companies with bright futures, so day-to-day movements, while worth watching, aren't usually worth worrying about. I tell readers of my Game-Changing Stocks newsletter this in practically every issue.
Instead of worrying, I concentrate on thinking things through.
Here is Obermueller's Law: The market is always trying to tell you something.
A lot of otherwise intelligent investors react to fluctuations emotionally -- either positively with gains or negatively with losses -- rather than objectively seeking to figure out just what the hell is actually going on.
On a day like yesterday, then, most investors will sigh or groan and complain that 481 out of the S&P 500's components ended the day in the red.
That's one way to look at things.
Another perspective worth checking out is to notice something else: 19 stocks posted gains. Listing all the stocks that fell on a down day will generate data. But a list of the stocks that rose is a step toward garnering useful market intelligence.
Take a look at yesterday's winners:
The first thing to notice is the strong retail presence. Of the 19 companies on this list, six -- Supervalu, Staples, Family Dollar, Big Lots, Kohl's and AutoZone -- are brick-and-mortar retailers.