Need to Know: Central banks drove this vital skill out of investor brains. Here’s how to relearn it.

by | Sep 29, 2022 | Stock Market

Staying above the turmoil is easier said than done for investors these days. The calm that settled on global markets after the Bank of England’s unprecedented intervention to shore up U.K. bonds seems to be fading, with stock futures in the red and a risk-averse mood building for Thursday.

It’s hard to find a big money manager who isn’t worried out there, amid fears of the Fed “breaking something” as inflation soars and Europe’s energy crisis worsens. With central banks — the BoE being a current exception — no longer providing liquidity support to markets, investors now need to be more nimble if they hope to preserve their capital, or even wring some alpha out of their portfolios. That’s the message from Stock Traders Daily and portfolio manager at Equity Logic, Thomas H. Kee Jr., who in our call of the day says they must learn or relearn one vital skill to survive these turbulent times. “Unfortunately, many in today’s market have completely forgotten how to manage risk, and over the past decade the FOMC has dissuaded Wall Street from being concerned about risk,” Kee said in a recent post, which he discussed with MarketWatch in an interview. In short, some investors have mastered the art of not managing risk at all, said Kee. And managing risk has been a core part of his Stock Traders Daily strategies from the internet bubble’s peak through during a decade of stimulus. Since 2000, he notes, “some of the most opportune times have come during times of widespread fear in the market.” At its heart, risk management “both reduces the temptations that come with greed, and the stress that comes with the fear cycles,” letting investing flow through economic and market upheaval, said Kee. So how to not be at the mercy of markets and fear? For starters, forget about that buy and hold strategy, said the portfolio manager, who has long used a strategy of alternating between cash and the highly liquid SPDR S&P 500 ETF 
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He highlights his Stock of the Week strategy as an option for retail investors, who can be more nimble than the bigger institutions that have too much money to move around. “The approach is to trade one stock every week, according to a trading plan that is de …

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