Why I’m Not Worried About the Stock Market’s Latest Sell-Off
It isn’t unusual for people to want to sell their positions and run for cover after multiple days of stock market losses…
I mean, Wall Street just broke its seven-week losing streak last Friday on the S&P 500 (its longest down stretch since 2001) and Nasdaq, while the Dow posted gains for the very first time in eight weeks.
The S&P 500 even tip-toed into bear market territory, which is when an index drops 20% from its last peak, on May 19.
But the savviest of investors know that’s exactly what we shouldn’t do.
If we decide to sell our positions, we could miss out on some of the market’s best performance because the days when stocks experience big losses are often followed by recoupment or good days. That means if we sell, we could miss the upside, which will cost us.
I won’t lie…
Market sell-offs are scary and painful for most investors, but they’re not something to panic about. Downward pressure on stocks is incredibly normal; in fact, it actually occurs more often than most people realize.
In fact, A recent Guggenheim study found that declines of 5% to 10% in the S&P 500 occur more than once a year, on average, while we see declines of 10% to 20% about once every 2.5 years.
But what a lot of people also don’t know is that Wall Street has suffered losing streaks like this three other times in history — 1970, 1980, and 2001. After two of those three times, the index rose 33% within the next 12 months.
For my history buffs out there, those two times were in 1970 and 1980. Of course, most of you don’t need reminding that the market was in a much different place in 2001 following the Sept. 11 attacks.
Now that you know this, and are hopefully feeling less nervous about things, the key takeaway here is that sell-offs are completely normal. Stocks don’t follow a set calendar, which means they move up and down based on things like earnings and sentiment and news, among other factors.
However, we still need to be aware of events like this so we can plan accordingly and adjust our strategy if needed.
Of course, I don’t believe that is the case because if we continue to sell options on high-quality companies and funds that shouldn’t lose much value, it is very likely we’ll continue to stay the course.
This leads us to Blackstone Inc. (BX), the high-quality stock I recommend selling a put on this week.
Blackstone Inc. is an American alternative investment company based out of New York, so don’t confuse it with the griddle sitting on your neighbor’s back porch. The firm’s asset management business includes things like private equity, real estate, public debt and equity, non-investment grade credit and so much more.
The company reported first-quarter earnings toward the end of April that beat Wall Street’s expectations…
Blackstone’s earnings per share came in at $1.55, which exceeded the average estimate of $1.06 per share. Its private credit funds also rose 1.7%, while its private equity portfolio gained 2.8%.
But its most recent stock price increase is thanks to its $1 billion partnership with Hipgnosis Song Management to invest in songs and music rights.
Pop superstar Justin Timberlake, who made a name for himself in the boy band NSYNC, is the latest to sell the rights to his songs to Hipgnosis.
The deal is valued at $100 million and will give Hipgnosis, a fund backed by Blackstone, full ownership and control of the songs Timberlake composed, wrote and performed as part of a boy band, solo artist and for movie soundtracks. Some of these hits include “Cry Me a River,” “SexyBack” and NSYNC songs such as “Bye Bye Bye.”
Shares of BX jumped over 6% last Thursday following the news, closing at around the $118 level.
The stock is also on an Income Trader Volatility (ITV) “buy” signal, which means now is an ideal time to benefit from selling put options.
ITV, the red line at the bottom of the chart below, gave the signal when it fell below its 20-week moving average (blue line), signaling that volatility is bottoming and we can expect shares to move higher.
To help minimize our risks, I’m recommending a trade that is protected by strong technical support and will be open for about two weeks.
But with the strategy we use over at Maximum Income, we can collect even more income. And we can do it without taking on any unnecessary risk.
In fact, this strategy works like an “insurance policy,” protecting your capital in the event of a downturn — while still giving you the chance to enjoy some upside.
I think every investor owes it to themselves to at least learn how this works, which is why I’ve released a report that tells you everything you need to know.
Go here to check it out now.