Former Secretary of Defense Donald Rumsfeld once remarked, “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.”
Up until very recently investors shrugged off geopolitical turmoil in Ukraine and the Middle East, economic slowdown in Europe and China, and the approaching end of the Fed’s QE3 program on October 29. (At the conclusion of QE1 and QE2 the market suffered a 15-20% correction, but stopped short of falling into official bear market territory.) But now the Ebola epidemic has landed on our shores and it’s spreading. Recent CDC attempts to contain the virus have not instilled investor confidence. This particular Ebola outbreak is proving to be particularly severe and complex. Wall Street is now worried the virus could mutate or become airborne, adding to the human and economic toll. As a result, US stocks are tanking while bonds and gold benefit from the flight to safety. I moved my managed account clients and newsletter subscribers incrementally to the sidelines between September 26 (75%) and October 1 (remaining 25%). These trades weren’t emotional knee jerk reactions; rather, my sell-to-cash moves happened only after specific technical parameters had been met.
♦ Please note that my readings will change without notice, so please don’t buy or sell solely based on anything you read in this blog. ♦