It may look like the bulls are in retreat on Wall Street but for investors looking to take advantage of market weakness, now’s the time to pounce, says Kevin O’Leary, who claims that there’s nothing special about the current market correction.
Markets rose sharply on Thursday morning with the Dow Jones Industrial Average up 150 points and the S&P 500 and NASDAQ both on the upswing. The rebound comes after the stock market suffered one of its worst days of the year yesterday, sending both the Dow and the S&P 500 tumbling below their 200-day moving averages and erasing all of their gains for 2018. The Canadian S&P/TSX Composite Index closed down 2.5 per cent and now sits eight per cent off for the year.
Market watchers are pointing to a number of contributing factors, including rising interest rates, trade and tariff concerns and a slowdown in China’s economy. Potential tightening of corporate earnings is also being highlighted as are mounting fears over increased regulation in the tech sector.
But regardless of who or what is to blame for the current pullback —a verifiable market correction at this point— there’s money to be made from all this carnage, says investor and TV personality Kevin O’Leary, who spoke on CNBC’s Disruptor 50 yesterday.
“Corrections are always unique and they always get started for different reasons but if you’re going to be an investor in the market then you have to look back in history and get some guidance on what’s occurred before,” O’Leary says.
“If you look at the S&P 500 during any period when the [US Federal Reserve] begins to tighten —and there’s always a different definition for why that’s happening— in almost 100 per cent of the time the market corrects for at least nine months into that cycle because investors don’t know if the Fed is tightening because of enhanced economic activity, or are rates going up for a different reason. And right now, the market doesn’t know the answer to that question,” he says.
O’Leary remains bullish on the US economy, pointing out that his own domestic-based companies in the US are doing well and just put up their best numbers ever for the last quarter.
“To me, this is a garden variety correction. It could correct as much as 22-25 per cent,” he says. “And if you can time the market, great, but I’m just adding to my positions. I did it again today.”
“You’ve heard this a thousand times from [Warren] Buffett: you love blood in the streets, you want to see it washing down Wall Street and everyone is saying, ‘It’s over, we’ll never go up again,’” he says.
“You’re starting to get that feeling now and I like it,” he says.