Markets are functioning well. The trading stops are working as designed. After nearly a 30% drop, investors will begin to consider buying. But, with a global recession at hand, the fundamentals on which value decisions are based will deteriorate. It’s a guess as to how far.
So what’s the right price to pay for something that is facing deteriorating sales and earnings? The answer is at a price low enough to cushion against worst case outcomes.
As an investor, pick your companies carefully as you re-enter the market. Don’t look to “call a bottom” for the market. Instead dispassionately research the prospects of a company in the current range of macro- economic outcomes. Determine your discipline as to how much uncertainty (risk) you are willing to tolerate in your forecast.
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