Stocktake: ‘Stay long humility and short hubris’

No one knows if the recent rally represents a dead cat bounce or a genuine market bottom

Ignore overconfident forecasters, says Ritholtz Wealth Management’s Ben Carlson

Ignore overconfident forecasters, says Ritholtz Wealth Management’s Ben Carlson

 

The frequency of bear market rallies is also noted by Ritholtz Wealth Management’s Ben Carlson. Stocks gained over 25 per cent during the 2007-09 crash before eventually hitting further low. There were three separate rallies of about 20 per cent in 2000-02 but stocks ultimately more than halved over the period. And investors witnessed a brief 20 per cent bounce during the “nasty” 1973-74 bear market. Back in the 1930s crash, there were rallies of 23, 27 and 35 per cent.

Still, the news isn’t all dark; market bottoms are also followed by explosive rallies, so no one really knows if the recent rally represents a dead cat bounce or a genuine market bottom. Ignore overconfident forecasters, says Carlson.

“The only trade I’m certain about at the moment is going long humility and short hubris.”

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