Is Wall Street heading over a cliff? Maybe not, but it could be time for investors to take a gut check.
Bear markets are easy to analyze, while bona fide bull markets are only a little more complicated. But for most investors, the real test of patience comes when stocks move sideways, without much clear direction either way.
And the type of market environment you see ahead says a lot about who you are and what you want from your portfolio. That’s why I love to ask the question: where do you see your investments going in the immediate future?
Notice that I am not asking about “the market.” All I want to know is how much confidence you have in the stocks you own, because if you aren’t looking forward to good things ahead, you’re in the wrong stocks.
Is Wall Street Heading Over a Cliff? The Hedge Fund Lesson
You know what I think about the market as a whole. My YouTube channel is constantly updating with my latest thoughts and projections.
In the long run, the market as a whole always points up. We got all the proof we needed today, with the S&P 500 and Dow Jones Industrial Average once again breaking records.
By definition, you’re living in the best of times. That’s all a bull market is. And markets spend a lot of time racing from record to record.
Is Wall Street Heading Over a Cliff? Avoid Investing in the Wrong Stocks
If you don’t feel that thrill of victory, you’re in the wrong stocks. Maybe your stocks have done well for you in the past, but you just don’t see any upside ahead. If so, sell.
On the other hand, your stocks may be stalled. A lot of Wall Street favorites are in that position right now. Apple Inc. (NASDAQ:AAPL), for example, is down nearly 2% so far this year, and even Amazon.com Inc. (NASDAQ:AMZN) is up barely 2% over the same period.
That’s a grind when you’ve gotten used to these powerhouse stocks rocketing 60-100% a year. And I’m going to be completely honest. I don’t see them continuing on that trajectory in the near future.
I am not criticizing either company. They’ve literally created trillions of dollars in shareholder wealth. My only question is whether they can create trillions more.
Other stalled stocks have a brighter future. Stocks that dominate my IPO Edge come to mind. They’re new to the market, often overlooked on Wall Street and are vulnerable to the market’s mood swings.
Is Wall Street Heading Over a Cliff? Some Stocks Are Taking a Step Back
Some of the stocks in my IPO Edge portfolio have taken a step back over the last month. I still love the companies and see a lot of bright futures ahead. It would not be a bad time for new investors to subscribe to the trading service by clicking here to capture the next leg up.
These positions are worth keeping in search of new heights. That’s a lesson that circulates in the hedge fund community. When a stock falls, we don’t ask ourselves if we want to sell at a loss.
Instead, we ask if we’d still buy at this price. And then we back up our answer with actual cash. Otherwise, we’ve lost faith and it truly is time to go.
Right now, I see a lot of people on Wall Street making similar decisions. Most are staying in the game. That tells you all you need to know about the market’s real mood.
Is Wall Street Heading Over a Cliff? Value Stocks May Have a Place in One’s Portfolio
But if you’re nervous, consider my Value Authority, where the goal is to lock in dividend yields and buy freedom for the rest of the portfolio to ride the market waves.
When you’re making money on your stocks quarter after quarter, you never need to sell a single share. In theory, the stock price doesn’t even matter.
You’re free to let the market storms blow.
Cannabis Corner: Long-term Gains Can Require Short-term Pains
Depending on your perspective, it’s either amusing or tragic to see market commentators struggle to explain the way cannabis stocks swing day to day. All too often, the story has to stretch to fit the facts.
This week, for example, Big Cannabis took a step back because either the Biden administration is too busy to pursue full national legalization or Canopy Growth Corp. (NASDAQ:CGC) paid $435 million to buy a small competitor.
Neither of these narratives is actively negative. At worst, no instant rollback of national regulations leaves the cannabis industry exactly where it is. It’s a neutral headline.
And as for CGC deciding to print more stock to buy rival Supreme Cannabis, I am actually thrilled. You know I have been fixated on consolidation as the key to long-term profitability in this fragmented industry.
Knocking out another independent cannabis supplier pushes $18 million a year in existing sales to CGC. That’s an extra 5% of revenue growth this year.
But the real thrill here is that Supreme doesn’t sell commodity plant product. Its cannabis strains are enhanced and carry premium pricing, which is what everyone in this space craves right now.
Furthermore, adding Supreme to the mix means CGC will hold onto roughly 6% of the Canadian cannabis market, leaving plenty of room for additional consolidation. Until we see that, there’s no clear winner among the cultivators yet.
Meanwhile, speculators will remain in control and these stocks will swing for no appreciable reason. That’s simply how volatile areas of the market behave.
After all, the cannabis stocks I track are up 65% so far this year. That’s a big swing to the upside that reflects the forces of consolidation knocking out weak hands and giving the survivors a better shot at making shareholders happy in the long run.
In that light, this week’s short-term pain is practically a rounding error. Don’t blame CGC for doing the right thing. And don’t look to the White House for a handout.
We have everything we need for long-haul satisfaction right here. I’ve got triple-digit-percentage cannabis fun in my IPO Edge portfolio and more on the way. This is an entry point, not the end of the world.
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