Central banks have driven this vital skill out of investors’ brains. Here’s how to relearn it.

By Barbara Kollmeyer

Critical information for the US trading day

Staying above the turmoil is easier said than done for investors these days.

The calm that has settled in global markets after the Bank of England’s unprecedented intervention to shore up UK bonds appears to be fading, with stocks in the red as risk aversion builds on Thursday.

It’s hard to find a big fund manager who isn’t worried there, amid fears the Fed will “break something” as inflation soars and Europe’s energy crisis deepens.

With central banks – the BoE being a current exception – no longer providing liquidity support to the markets, investors now need to be more nimble if they hope to preserve capital or even extract alpha from their portfolios.

That’s the message from Stock Traders Daily and Equity Logic portfolio manager Thomas H. Kee Jr., who in our call today says they need to learn or relearn an essential skill to survive in these times. turbulent.

“Unfortunately, many in today’s market have completely forgotten how to manage risk, and over the past decade the FOMC has deterred Wall Street from worrying about risk,” Kee said in a recent post, which he discussed with MarketWatch in an interview.

In short, some investors have mastered the art of not managing risk at all, Kee said. And risk management has been at the heart of his Stock Traders Daily strategies from the peak of the dotcom bubble through a decade of recovery. Since 2000, he notes, “some of the most opportune times have come during periods of widespread fear in the market.”

At its heart, risk management “reduces both the temptations that come with greed and the stress that comes with cycles of fear,” allowing investments to weather economic and market upheavals, Kee said.

So how not to be at the mercy of markets and fear? For starters, forget that buy-and-hold strategy, said the portfolio manager, who has long used a strategy of alternating between cash and the highly liquid SPDR S&P 500 ETF (SPY).

He pitches his Stock of the Week strategy as an option for retail investors, who may be more nimble than large institutions that have too much money to move around.

“The approach is to trade one stock each week, according to a trading plan designed to follow the expected market flow over the coming week. The correlation factor is important, but the risk controls involved in the trading plans trading are traditional. They are normal stop losses, but what is not normal is that this strategy also ends every week in cash”, explains Kee.

This means that investors can “nap” from market exposure over the weekend, as the objective of the strategy is to trade one stock each week and end each week in cash.

And using turbulent environments to an investor’s advantage has also worked for them when it comes to a fundamental stock. Kee bought Apple (AAPL) in May, then sold it near highs in mid-August with Invesco QQQ (QQQ), an exchange-traded fund (ETF) that tracks the Nasdaq-100 index, in mid -august.

It again bought Apple, which had a tough day on Wednesday amid reports of slowing demand for its new models.

He says investors should look for stocks that can “stand up to good times and bad times,” he said. “Apple is an indicator and you don’t want to play with inferior stock in conditions like these,” he said, adding that because of its quality, the stock can be held for a month. or two.

Read:Apple and Tesla are ‘last bastions of hope’ for retail investors, analysts say

The steps

Equities are under pressure as bond yields resume their upward march, as is the dollar, which is putting pressure on the pound and the euro. Yields on UK government bonds, at the heart of Wednesday’s financial storm, are rising again. Oil and gold prices fall.

Watch the yuan as Chinese state banks have reportedly been told to stock up on foreign currency to intervene.

The buzz

Trapped in their homes and 2 million without electricity. The deepening of one of the strongest hurricanes to ever hit the United States begins in Florida.

Weekly jobless claims fell 16,000 to the lowest since April, while GED revisions showed confirmation of a contraction in the first half of 2022. We’ll also hear from St. Louis Fed President James Bullard , and San Francisco Pres. Marie Dally.

CarMax (KMX) stock tumbles after a bigger-than-expected shortfall as customer “affordability challenges” caused a sharp drop in sales. Larger than expected losses from Rite Aid (RAD) and Bed Bath & Beyond (BBBY) hit these stocks.

Semiconductor group Micron Technology (MU) and sportswear maker Nike (NKE) will both report after the market close.

Warren Buffett’s Berkshire Hathaway (BRKA) has purchased an additional 6 million shares of Occidental Petroleum (OXY), according to a new filing.

Shares of luxury carmaker Porsche edged higher in its trading debut, after pricing its IPO at the high end of the range.

No excuses. In her first comments since the UK government’s tax cut plans sparked the market upheaval, Prime Minister Liz Truss played defence. Alarmed US and IMF officials reportedly pressured his government.

Opinion: BoE’s surprise move was smart – but government still faces big challenges

The best of the web

Cages stacked from floor to ceiling without light. Humane Society uncovers shocking cruelty at Romanian chinchilla fur farms

As a fourth Nord Stream leak is discovered, here’s what scientists say about the environmental impact

A long-term options trade of the ‘Industry’ show reportedly paid off on Wednesday


From the “how bad it is” department…

Stock tickers

Here are the most searched tickers on MarketWatch as of 6 a.m. EST:

Ticker  Security name 
GME     GameStop 
TSLA    Tesla 
AMC     AMC Entertainment 
AAPL    Apple 
BBBY    Bed Bath & Beyond 
APE     AMC Entertainment preferred shares 
NIO     NIO 
AMZN    Amazon 
TWTR    Twitter 
DWAC    Digital World Acquisition Corp. 

Random plays

President Joe Biden accidentally called a deceased congresswoman

Former British footballer enlisted in the Russian army

Dogs Can Smell Your Stress

‘Gangsta’s Paradise’ rapper Coolio has died aged 59.

Need to Know starts early and updates until the opening bell, but sign up here to get it delivered to your inbox once. The email version will be sent around 7:30 a.m. EST.

-Barbara Kollmeyer


(END) Dow Jones Newswire

09-29-22 0934ET

Copyright (c) 2022 Dow Jones & Company, Inc.