The final quarter of the year has had a dreadful start with markets moving sharply lower last week. The slump wiped out the measly gains blue-chip stocks had made over the past one year. Worse yet, a slew of disappointing data -- slowing U.S. manufacturing activity, the trade war, interest rate uncertainty, signs of economic slowdown, contraction in corporate earnings -- suggests things may get worse before they get better.
The one-year returns for S&P 500 and Dow Jones indices are reflecting a loss of 0.50% and 2.3%, respectively, as of Oct 3. The recent swoon, coupled with growing fears of recession, may be a harbinger of deeper declines and panic selling. Prudent investors may want to position their portfolios defensively and look to add stocks that provide bigger value and a margin of safety.
