It's noon on Sunday-- Lindsay and I are sitting on the couch. She's reading 'braiding sweetgrass' and I'm writing this now. What a wild ride its been since March 2018 when I first started investing-- its only been 3 years but they feel like a life time with the number of events that have transpired since.
I saw the Dec-2018 decline which was largely driven by Fed wanting to kick up rates, US-China trade war, fear of economic slowdown. My first substantial downturn of sorts which I think did well on, and cruised through.
In 2020, i saw the pandemic and the subsequent large ~30% crash in the nasdaq -- my all in cash contribution of ~$400k went to ~$160k which was a real scare. I levered up and went longer -- to come out with all in cash inv. of $490k by Dec and total value of $630k+ later.
In Sept-20, I saw another 12% nasdaq fall which, by this time in March 2021 now-- I don't even remember amid all the action and volatility since. Vix has been surprisingly steady between $20-25 since March 2020, although pre-covid it maintained a range of $12-16. So yes, the volatility has been extreme and these have been unprecedented investing conditions.
I have been surprisingly stable through this, except times like the last couple of weeks when the vix jumped to $37 and my anxiety levels spiked along with the pretty large drop in nasdaq (~12% again). This time, compared to Sep-20 however, I felt it much more mainly because in Sep, I was probably 70% long and 30% cash sitting on mid to large cap growth names. And my portfolio had massively recovered from my ~$160k low. My bar was different.
This time, I'm long 100%, no cash, all invested in very high beta mid cap tech growth stocks. So I took a good 22% hit on the portfolio in the last 2-3 weeks. Which has wiped out pretty much all my gain since December.
Either way, I'm staying invested through this cycle -- given we have $1.9tn of stimulus which the Senate passed yesterday, dovish and supportive Fed w $120b/month program, visibility into strong economic recovery, positive vaccination news, even Yellen pitched in this weekend saying she thinks spike in ust 10y yield is sign of growth expectations and not inflation scare.
Yes, while inflation is expected to rise up to 2.25% in the short term, this was expected and Powell says its a one-time reset. Fed is ok to let is run hot for some time as long as average is 2% over the long term. It has been sub 1.5% for years so I take this to mean he's ok for a couple of years of over 2%. Historically, in the last 10-11 years since the bull run in 2009 began, stocks have gained despite ust yields shooting up-- that correlation of high yields and fall in high growth long duration tech stock prices --and associated market fear should be temporary.
The bull run is expanding to value names -- at the cost of growth for now-- and its ok. Wider bull run is better than spikes in specific sectors. I'm a buyer the more it falls. Just cant see conditions which would drive a more than 15-17% overall nasdaq correction.. so I dont care if its falls 3-5% points from where we are today. I'm long and will be gross ~130% long on margin, if it falls more.
Anyone wanting to buy banks and energy stocks has already seen incredible returns this year-- and they won't grow too much from here. How do you compete with tech assets growing 30-50% yoy? Sooner or later, the tech rally will come back -- there's only one place the world is going. And its the tech way.
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