June 16, 2019

How to Handle a Painfully Unpredictable Market

How to Handle a Painfully Unpredictable Market


After the wrenching swings of late 2018 and early January, it was difficult to harbor many illusions about the stock market.

It became clear that investing in stocks wasn’t easy, predictable or safe, at least in the short run. If you weren’t a risk taker or deeply committed for the long term, it was difficult to look at the market closely and remain calm.

In fact, the long bull market had a near-death experience in December. Based on intraday trading, stocks descended just below the 20 percent-loss threshold that customarily denotes the birth of a bear market.

Counting only prices at the market close, however, the Dow Jones industrial average didn’t quite fall into that dismal territory. Still, despite a market rise in January, losses have been severe, especially in sectors that had been highfliers, like technology.

What’s an investor to do? Our quarterly survey contains some lessons and suggestions.

Recession fears have emerged despite strong job growth, making some investors wary of stocks and looking for havens. But many strategists urge caution, saying it isn’t wise to pile on risk until the status of the market and the economy are clearer.


Real estate funds fared reasonably well through much of the autumn downturn. While headline-grabbing sectors like technology plunged, funds that invested in commercial real estate — office buildings, malls and warehouses — were fairly steady. What are their prospects in a really rocky market?


Bonds are often a source of solace during stock downturns, and active bond funds have done relatively well compared with index funds. Active bond funds were actually beating index funds in 2018 until December, but then they fell behind.

The problem is that index funds tend to be cheap and difficult to beat consistently. In the longer term, it’s hard to make a strong case for the human touch.


Social media companies have made a big mistake, our columnist John Schwartz says. They have apologized for what they say are errors. But he has a plan: He will proudly do bad things, evil things and, with total transparency, become obscenely rich.


Several top-performing funds outpaced their peers. They took different routes, like betting on Latin American companies, real estate investment trusts and dividend-paying stocks.


So-called inverse funds that move against the market offer a way to hedge that can be splendid when most stocks fall. But these funds drop rapidly when the overall market rises, and they can quickly cause major damage to a portfolio.


By carving the stock market into specialized slices, these funds take investors into interesting places. Yet they may tempt shareholders to take imprudent risks in the quest for the next big thing.


Despite a history of performing well in down markets, investments in the health care industry have looked vulnerable amid uncertainty about American health insurance.


The author of a new book argues that you probably can retire far sooner than you think, but she leaves out a lot of details.


After a long stretch of market woes, investors have many choices for protecting their portfolios, from complicated maneuvers to a classic response: doing nothing.

Follow Jeff Sommer on Twitter: @jeffsommer



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