Why We Should Continue To Stay Invested Despite Stocks Pullback?

On Thursday (14 Nov), stocks experienced a slight pullback, with the S&P 500 closing 0.60% lower. The market has continued to fluctuate after its record-breaking rally fueled by the presidential election and an FOMC interest rate cut.

Data on Thursday (14 Nov) Morning on wholesale prices and jobless claims came in largely as expected. Federal Reserve Chair Jerome Powell, in his first appearance since the central bank cut its benchmark rate last week, expressed confidence inflation would continue to decline toward the Fed's target, but that the path would be "sometimes bumpy." The economy, he added, "is not sending any signals that we need to be in a hurry to lower rates."

If we looked at the FedWatch, the probabilities of a 25 basis points cut in Dec have dropped from 82.5% one day ago (Wednesday) to 60.6% (Thursday) after the latest Producer Price Index report revealed that wholesale prices increased in October at their steepest rate in three months and Fed Chair Jerome Powell said there was not a "hurry" to cut interest rates.

Last week, the investor sentiment improved again, as shown in the Thursday’s AAII Investor Sentiment Survey, which reported that 49.84% of individual investors are bullish, while 28.35% of them are bearish.

The VIX index, a measure of market volatility, declined by over 20% last Wednesday, moving back below the 20 level and nearing the 15 level. This confirmed risk-on sentiment and a lack of fear in the market. It has since moved sideways.

Historically, a dropping VIX indicates less fear in the market, and rising VIX accompanies stock market downturns. However, the lower the VIX, the higher the probability of the market’s downward reversal. Conversely, the higher the VIX, the higher the probability of the market’s upward reversal.

So I would think that there are still strength from the mega-cap and also tech stocks, the pullback might be due to profit taking and consolidation.

I am still holdin onto my NVDA stock as i see this stock would have more potential upside move after their earnings next week.

Despite the slight pullback, we are seeing investor sentiment still bullish, this could show that the pullback is temporary, as investors I would continue to stay invested in the market.

This is because the defensive stocks have shown that some of them are still continuing to perform. This might be something we could be looking at.

Appreciate if you could share your thoughts in the comment section whether you think investors should stay invested despite market pullback.

isclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.