by Gary Alexander

March 3, 2020

The headlines and comments I heard last week almost all dealt in superlatives…the “worst” this and that.

A couple of examples:

“Dow plunges 1,100, worst point drop in history”

–CNBC Headline, February 27, 2020

“Three of the Dow’s five worst days in history happened this week.”

– Tucker Carlson, Fox News, February 28, 2020

The problem with this reporting is that they deal in absolute numbers – Dow points, in this case – rather than percentage declines, and they deal in short time frames (like a week) rather than a longer perspective.

While Thursday’s 1,190.95 Dow point drop was narrowly the worst point drop in history, the decline was only 4.42%. As most casual market historians know, the Dow collapsed by over 22% on October 19, 1987 – about five times as much in percentage terms. There have been 20 daily Dow declines over 7%.

This market decline has been sharp – about 15% in barely seven trading days – but sharp declines have happened several times during this 11-year bull market (its 11th birthday comes next Friday). You seldom hear this kind of historical perspective from the major media. They always scream that this is “the worst day since…” rather than say, “This has happened before, and the market recovered within a few months.”

There are a few sane sources out there – market professionals with smaller followings of smart investors bucking the mass media, which lures the public into hysterical over-reaction. Pros like Yardeni Research and Bespoke Investment Group are always quick to remind their clients that we have been here before.

Here are a few important historical perspectives:

Market Corrections since World War II Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

There have been 26 market corrections (not including last Thursday) since World War II, with an average decline of 13.7%. Recoveries have taken four months on average. The most recent correction occurred from September 2018 to December 2018, when the market fell almost 20%. According to Ed Yardeni, there have been six 10%+ corrections during this bull market – two of them falling over 19% in the S&P 500 – and two other corrections, which almost topped 10%, reaching a total decline of 9.8% and 9.9%.

Market Corrections During This Current Bull Market Table

Most of the sharpest market declines in market history happened because stocks rose too far too fast, and a narcotic euphoria set in. The chatter was that “this time is different” or “stocks will keep rising forever.” That happened in 1928-29, in 1986-87, when stocks rose 50% in just 10 months, and in 1998-2000.

In the last 14 months, from December 24, 2018 to February 17, 2020, the S&P 500 shot up 44% and NASDAQ rose an unsustainable 59%. The market was long overdue for a correction – as Jason Bodner and Louis Navellier have clearly been warning, relentlessly repeating that this market was “overbought.”

The S&P 500 declined 11.5% last week. Bespoke shows how the S&P has performed in the weeks and months after all weekly drops of over 10%. There have been 14 such massive weekly declines. Bespoke found that the index has averaged a gain of 3.53% in the following week, with positive returns in 12 out of the 14 previous times. Over the next four weeks, the S&P averaged a gain of 2.92% (with a median gain of +4.1%), and over the next three months, the S&P 500 has rallied by an average of 5.61%. Most importantly, the S&P was up an average 12.52% 12 months after any weekly decline of 10% or more.

What You Should Do Now: Refuse to Panic!

I have been investing for over 50 years and I am ashamed to say that I panicked and sold my first stock investment during the crisis of 1974. I sold at the worst possible time. I also sold my retirement portfolio in 1979, when I thought the market was doomed. I bought gold instead. In short, I made a lot of mistakes.

Around 1990, I made a “buy and hold” resolution, and that has made all the difference in my life, and in the success of my family. I was immediately tested as the Dow fell 21% from nearly 3000 in July 1990 to 2365 in October following Saddam Hussein’s invasion of Kuwait. Tokyo stocks had already fallen 48% in nine months, and there was a savings & loan crisis brewing. At October’s New Orleans Investment Conference, I moderated a “bull vs. bear” panel and by a show of hands, only two of the 500 investors in the audience were bullish on stocks. Yet I held firm and the Dow is up over 10-fold since October 1990.

Tokyo Nikkei Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Pundits in 1990 were warning about the Coming Crash and Greater Depression. They were right, sort of, but they got their geography wrong. The Crash and Depression happened in Japan, not the United States.

In 1994, I formed a self-help group of recovering doomsday writers and speakers. I called the group “Apocaholics Anonymous,” a mythical band of brothers who refused to spread panic or sell stocks when the media urge us to press the panic button. There was a lot of temptation to sell stocks in 1994, what with Fed chair Greenspan’s six rate increases, “Hillary care” in the White House, the peso crisis, and Orange County bankruptcy, but I held firm, and the Dow is up about 7-fold since 1994. Since then, we’ve seen 10 or more threats of global epidemics, 10 or more market crashes, 9/11, wars and nuclear threats, some bad Presidents and bickering Congresses, yet stocks just keep on rising. I’ve seen my portfolio fall sharply in 2000, 2002, and 2008, but the market recovered rapidly, and it will likely rise after this correction, too.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
Ultra-Low Treasury Yields are a “Screaming Buy” for Stocks

Income Mail by Bryan Perry
Power Play for Income Makes Perfect Sense

Growth Mail by Gary Alexander
The Media Make Bad News Sound Worse

Global Mail by Ivan Martchev
A Hitchhiker’s Guide to Coronavirus

Sector Spotlight by Jason Bodner
Panic Selling Rocks Markets…What to Do Next

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

Important Disclosures:

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at www.adviserinfo.sec.gov or by requesting a copy by emailing info@navellier.com. All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.