Fire Drill or False Alarm?

Fire Drill

When we were still in our elementary school, we were often being fire drilled what should we do if the fire alarm being triggered. This fire drill is important even though real fire might not possibly happened and in fact, it really did not happen in my entire school days right up to university.

There was once a fire drill exercise was told to one of its residence halls and instruction was given out to its residence on what to do when the fire alarm being triggered. During the drill, one of its residence, called Jake didn’t follow such drilling exercise, thinking this is just a waste of time and effort. He thought he would be familiar with the escape route in case a real fire broke out and it would be possibly very rare case in his entire life or possibly would have never happened.

After a while, in the middle of the night, the fire alarm triggered, all those residence woke up and followed the procedure they had have just exercised. They all left the building. But Jake was thinking another fire drill exercise again or possibly a false alarm. And he didn’t boder about it and continued his sleep. But however, he smelled the unusual smoke from his unit. He was alerted, then woke up immediately with panic and ran out of his unit with tumble and falls along the hallway. But smoke became thicker as he ran from his hallway, staircase and fainted on his way back down. Good thing, he was found by the rescue team and his life was safe but not without bruises and injuries and was hospitalized.

Worst Alarming Market Drop 

Yesterday, all US markets had a very rare one day big drop more than 2 years. Dow Jones Industrial Average Index fell 2.5% or 665.75 points, S&P 500 tumbled 2.1% or 59.85 points in one day. Both markets had the worst week in 2 years. Could this be just a fire drilling or false alarm?

Worst Drop
S & P 500 Worst Drop in 2 Years

Asian investors woke up and thinking what has happened to US market. A preliminary news article attributed the fall to the unexpected good job report just released. It was possibly caused by the fear of investors thinking the rate hike will be altered faster than previously forecasted or expected.  More news on this analysis would be possibly coming out during this week end readings.

We do not know for sure what would happen when market opens on Monday. Will it continue to fall as what was predicted by some technical analysts saying an inevitable market correction comes true? If it continues to fall, how far low can it be? Can it be 5%, 10% or 20% correction?  Will it bring in the imminent global economic recession? All these questions can be the major concern for active investors.

Looking at the economic performances, the above report said, Out “of the S&P 500 companies that have reported as of Friday morning, 78 percent have beaten bottom-line expectations, while 80 percent have surpassed sales estimates, according to Thomson Reuters”.  Imminent US economic recession is out of logical deduction.

Possibly a Temporary Pull Back

A temporary market pull back is more possible at this time. Question still remains on how low this pull back can be?  Will there be a strong technical rebound on Monday after the week end rest? Many investors will have taken a fresh look at the market condition after their weekend rest and possibly more buyers will be arisen than sellers on Monday opens.

What if market selling pressure persists on Monday? Then it will be a good exercise like the fire drill. It would probably not be a good idea to sit back and ignore it totally like Jake in the story above. Just spent time watching market going down and recover without any benefit from it would probably be a waste of golden opportunity instead.

It would be possibly a good idea to either top up, bottom fishing, switch positions, or do partial, if not total adjustment for your fund portfolio, gradual switch over etc. There are plenty of strategic positioning we can do or learn to take hold of this rare opportunity to increase our rate of investment return.

It would be a good learning experience accompanying market fall and rise during volatile time like this, especially for the novice investors who have just joined this investment realm during recent 2 years. Therefore, I hope it will continue to fall further when market opens on Monday. If not, we should be disappointed.

Storms Trained Up Good Sailors

It will accustom us to deal with deadly scenario in case of a Black Swan event really appears.  It is always at the storm where a good sailor can be properly trained, not at classroom.  What do you hope for when market opens on Monday? As for me, either market recover or still going down, will still be good for me.

Normally most investors hope it will recover back to recent height. In that case, you will miss the wonderful learning experience. Remember my maxim saying, you got to “learn before you earn”? Currently, you can have ample time during the week end to look at your portfolio and figure out what you shall do on Monday in responding to market direction.

Happy learning!

 

 

 

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2 thoughts on “Fire Drill or False Alarm?

  1. Thanks for responding. I believe this is what novice investor would normally do, avoiding the storm. Just like what the article has meant, total avoidance is not a good idea. You would not be able to learn how to sail through the storm and becoming a skilled sailor. Unless u expect market would go down right after Monday market opens and enter again at the bottom. And again this is not an easy task. You would not know where the bottom is, for one. Market might not go down on Monday, that’s two. The second scenario would make you feel regret of your choice of total withdrawal. Partial switch over to bond might be more recommendable than total withdrawal. Anyway, we are all learning, there are ways we can improve further for our investment skill if we persist on…

    Like

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