When Is Bad News Good News?

| February 8, 2014 | 0 Comments

newspapersInvestors let their guard down and took a punch right on the chin to start 2014.

As this chart from Bloomberg shows – the perception of the health of financial markets had reached an all-time high.

BloombergFinancialConditions012114

Here’s the thing… risk happens fast. 

Looking back it’s easy to see.  Hindsight’s always 20/20.

Investor expectations were running high.  Total margin debt on the New York Stock exchange was at record highs.  The interest rate on the 10-Year Treasury had jumped from 1.6% in May to around 3.0%.  And the Fed was beginning to taper.

That was the situation we were in at the beginning of 2014. 

In other words, it was a perfect storm for a correction.  Overly optimistic outlooks often lead to not-so-great market performance.

In fact, every sector but utilities is down year-to-date.  As you can see below, the more economically sensitive, the worse the sector has performed.

Sector Performance

Now, after a 6% drop in a matter of weeks, the S&P 500 is bouncing back.    

And here’s the best part…

Stocks are rebounding on bad news.  Today’s non-farm payroll data missed expectations.  Economists were expecting the US economy to add 190K new jobs but we only added 113K.

That’s a big miss any way you slice it.  Yet, the S&P 500 is up today.

Here’s the upshot…

When stocks start reacting positively to negative news, it’s time to get bullish on stocks.  This is likely the best buying opportunity we’ll see this year.  So find the ETFs you want to own and take advantage of it.

 Good Investing,

Corey Williams

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Category: ETFs

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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