Yes, I know I sound like a broken record. How many times have I said we remain buyers of the market? Throughout how many percentage points from the top have I told investors to be buying? The answer is too many, especially given the context of the S&P500 officially entering bear market territory (defined decades ago to be a market drop of greater than 20%).

The truth is, investing is hard. Picking the right sector, the right stock, correctly size positions, know when to buy, to sell ... they take hard work. Arguably, it should be hard like this. The market has reverted to fundamental-based methods, unlike what the tens of millions of new investors on Robinhood have experienced in 2020 - 2021 with easy monetary policy from the Federal Reserve and stimulus from the government. Companies that never deserved to go up as much as they did, the unprofitable, concept tech stocks such as a Virgin Galactic (SPCE), a Fastly (FSLY), a Jumia (JMIA) and countless other SPACs have all round-tripped back to pandemic lows. Bitcoin has round-tripped to levels not seen in 2 years. I like this. 

So why stay invested? We stay invested because from a top-down view, the U.S. is a profit-oriented, economy-driven society. We have picked sectors with secular growth, large total addressable markets for companies to capitalize from. From bottom-up, we have identified companies that make a lot of profit, grow at a high rate, demonstrating spectacular execution from the C-suite, led by really smart people. Most importantly, these companies are now trading at very reasonable valuations. We stay invested because if you look at the chart of stocks, ever since this concept was first introduced to humanity, the general direction has been north by northeast.

Now let's get a bit more specific, and talk about this week especially. Why stay invested as the Federal Reserve prepares to announce interest rate decisions on Wednesday?

The Fed has telegraphed since the last meeting that they will do a 50 basis point hike in June. Also in that last meeting, the Fed said a 75 bp is not on the table. However, we just got a flaming inflation report last week (main driver of the market rout in the past 2 trading sessions), that many are begging the Fed to do a 75 bp hike.

What happens if the Federal Reserve does hike interest rates 75 basis points on Wednesday after saying repeatedly that 50 basis points was enough? It may discredit the Fed, but I think the market will cheer on because it would be a decent effort against inflation. If Fed Chairman Jerome Powell is going to do a 75 bp hike, I think he should also double the amount of bonds for sale (quantitative tightening) so we get the yield curve back to normal, where longer term rates are higher than short term rates. It matters because of this yield curve inversion, everyone is on the same page that a recession will happen, we just don’t know how bad it will be.

I understand the position the Fed is in. At this point, they are the only force left to fight the inflation battle. Who wants to root for Ukraine to compromise some territory to Russia in exchange for peace? That would stop the upward pressure on food and gasoline and cause an environment that we would all want to own stocks. 

It’s easy to hope that Chinese President Xi Jinping sees the error of his ways in treating Covid, especially given how open our society has become versus theirs. I have given up on trying to understand why China doesn't want to use Western-made vaccines, like what the rest of the world has been doing. Or maybe President Xi is deliberately trying to give Jay Powell a tough job, keeping China closed so that American inflation is high.  

I don't know about China, but here's what I know:

On Tuesday, I need you to start buying. We are minus 6.9 on the S&P 500 Short Range Oscillator, which means you have to buy. Anything above minus 5 means you have no choice but to buy.

Let's play for a bounce into the Fed meeting or after given the oversold conditions. But have no doubt about it, this is not over and it won’t be until a winner is declared in the Russia’s war against Ukraine and a loser is declared in China -- being the current Covid lockdown policies of President Xi. 

It’s not yet the time to make money, it’s the time not to lose money. You can play for a bounce but accept that it is a bounce. You need to stay disciplined, buy at oversold conditions and sell right into the bear market rallies. You need to constantly high-grade your portfolios, getting out of bad names that you no longer have strong convictions in, putting money into oversold stocks of good companies. 

It is no longer the time for Robinhood investors. This is the time for hard work, fundamental-driven, disciplined, long-term outlook investors. That's what we do.