Why Whitney Tilson Is Selling Stocks: 'We're In An Enormous Hole'

The SPDR S&P 500 ETF Trust SPY has rallied more than 30% off its March lows. But given the fact that the U.S. economy continues to hemorrhage jobs at an unprecedented level, there are a growing number of market experts that believe the recent surge in stock prices may be a bear market rally.

Former hedge fund manager Whitney Tilson is among the rally skeptics. On Monday, Tilson said in his daily newsletter that he has been selling stocks because the U.S. economy is now “in an enormous hole” and will take years to fully recover.

Tilson also said the country isn’t making nearly as much progress in combating COVID-19 that he thought it would back in March.

“We did indeed flatten the curve and avoid the worst-case scenario, but we aren’t even close to seeing the big drops in cases and deaths that I expected based on other countries’ successes,” Tilson said.

Lackluster Coronavirus Recovery In US?

Tilson said he is anticipating U.S. daily deaths will remain at levels between 1,000 and 2,000 for the foreseeable future.

“As a result, most Americans will continue to be fearful of returning the normal life and activities — even if their state government allows it — which will continue to weigh on the economy and stocks,” the investor said. 

But while he has been selling stocks to take some profits and reduce risk given the recent rally, Tilson said Tuesday that investors who have multiyear investment horizons don’t need to do anything.

“Just stick with the plan (or at least what I hope is your plan!) of living beneath your means, saving regularly, and investing the savings into blue-chip stocks and index funds.”  

Benzinga’s Take

For traders attempting to time the market, it’s never a bad idea to lock in some profits when the market has moved so much in such a short amount of time. But by the time 2030 or 2040 rolls around, long-term investors and retirement investors wont remember or care if they bought stocks in 2020 when the S&P 500 was at 2,900 or 2,400.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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