The U.S. stock market, or more specifically, the stocks that comprise the stock market, continue to chop around as we enter the final quarter of 2016. Most stocks are getting tossed higher and lower in a very short period, resulting in portfolios looking like a chop fest. If you own something, don’t blink or it may move one way or the other, or both, in just a few short days.
The financials were looking good at the beginning of September, then turned south in a pretty significant way. Now they are just chopping around. Real estate looked like a champ until August, and now it’s just chopping its way back to where it started at the beginning of the year. Oil fell out of bed in July, only to reverse in August, and then chop between higher highs and lower lows back to higher highs again this past month. Biotechs crashed in June, soared in July, and have chopped around in August and September, which wouldn’t be a big deal except for the fact they may move over 2% on any particular day. That’s great if you are on the right side of the 2%, but predicting the direction on a daily basis is no better than a coin flip.
Don’t get us wrong. Chop can be successfully traded, as long as a stock stays within a range, or moves out of the range in the direction you hope for. Problems arise when your stock moves out of the range in the direction you didn’t hope for, and does so in dramatic fashion, like housing did a few weeks ago, or the precious metals this past week.
The only thing that has been unrelenting in its run higher have been the techies. The moves in the semis and some of the internet related stocks post- Brexit has been remarkable, and there appears to be no end in sight. Otherwise, your portfolio is probably getting tossed around like chopped salad. Not very tasty or satisfying.
So if you are forced to put money to work, don’t look away for long, or you just might find your security that looked oh so good two days ago has been suddenly chopped to pieces.