Weekly Market Insights: 2-3-22 Volatile Week Ends On Rebound
The most difficult market condition to trade is a Bear Market Condition. Not because it is expected to decline but because it is not the opposite of a bull market in that the chart shows a steady incline slope. The bear market chart resembles a baby’s heartbeat rhythms. This is characterized by quick increases followed by dramatic declines, causing many investors to take one of 2 paths, exit at their puke point or let it ride. Neither are advantageous for the amateur investor. Leaving at the point of severe nausea is usually at or near the bottom, resulting in the realization of capital loss. To turn a deaf ear or blind eye and letting it ride can result in a lost decade when you stop to measure the point-to-point progress and learn that there really isn’t any progress, just lost time.
From an “Investor” on Instagram:
Friday, 28th of January, “I set a goal of 1.2M for 2022 and while that goal is lofty but achievable, I think. After the first 2 weeks of January, I only have 1.8M to go!”
THE WORST JANUARY SINCE THE FINANCIAL CRISIS
The S&P 500 has experienced the worst beginning to the new year since 2009 according to an article in the Financial Times this morning. “It’s going to be that type of year. We believe it’s going to require a more nimble approach to asset allocation,” said Wylie Tollette, Franklin Templeton Investments’ head of client solutions.
The NASDAQ has declined 9%, the worst single month decline since November of 2008. It was so much so that an article in the Financial Times puts Cathy Woods Ark fund, the very same fund that in 2020, absolutely slayed the markets with outsized winners that nobody else bet on such as TESLA and APPLE, at the same level as Warren Buffet’s Berkshire fund, trying to demonstrate a reversal of fortune on a massive scale.
All I could think of was that the market is never a buy and hold approach. You would never get in your vehicle and drive straight from your house to your office without adjusting for traffic, snow (in the case of this morning commute last week), and detours to the office but all those “smart” investors out there still do just that, -buy and hold and hope approach.
There are market conditions for every type, style, approach, and investment strategy out there and to suggest a one-size fits all approach just doesn’t make any sense to me.
There will be a point in time in which we will embrace a reversal of our current approach and go back to growth for clients. Our investment approach is conditional, not time oriented. We will remain tilted away from risk until the data suggests we tilt towards it again. At present, we do not see, in the near term, any information or condition that would warrant stepping back into growth.
“If you check the weather forecast to help determine what to wear or what to do or where to go that day, why on earth would you not check the forecast of the market conditions to help determine how much risk and where to invest for that condition?”
We believe that 2022 will be a very difficult year and clients should set appropriate expectations or they could end up sadly disappointed. Even Tom Brady doesn’t win the Super Bowl every year!
We are focusing on the development of growth ETF portfolios and preparing for the turn from bearish to bullish trends in the markets so that when it’s time, the work has already been done.
Till we speak again, enjoy the white stuff cause there’s going to be a lot of it!
General Market Commentary
An exceptionally volatile week, marked by wide intraday price swings, whipsawed investors with stocks ending higher following a surge to the upside on the final trading day of the week.
The Dow Jones Industrial Average rose 1.34%, while the Standard & Poor’s 500 gained 0.77%. The Nasdaq Composite index ended flat (+0.01%) for the week. The MSCI EAFE index, which tracks developed overseas stock markets, declined 3.54%.1,2,3
Rising bond yields, Federal Reserve uncertainty, and escalating tensions on the Ukrainian-Russian border unsettled markets all week. The week opened with two successive days of deep early losses that were erased by furious, late-afternoon rebounds. The following two-trading sessions that started with strong gains that evaporated with late-session selling.
The most dramatic session was Monday, in which stocks ended slightly higher after hitting intraday lows that saw the NASDAQ fall 4.9%, the Dow shed 1,115 points, and the S&P 500 moved into correction territory. Technology was at the epicenter of the volatility all week as rate fears weighed on sector. Stocks rebounded strongly on Friday, managing to conclude a week on an upbeat note.4
Fed Readies Market for Rate Hikes
Last week’s meeting of the Federal Open Market Committee (FOMC) left rates unchanged, though officials signaled short-term rates would likely be raised at its next meeting in March. As expected, the Fed also approved one last round of bond purchases, bringing quantitative easing to an end by March.5
Left a bit more nebulous were details on the pace and timing of reducing the Fed’s balance sheet, a lingering worry of some investors. But Fed Chair Powell indicated that shrinking the Fed’s asset holdings may occur at a faster rate than in past periods of balance-sheet reductions, such as in 2014 and 2017.6
This Week: Key Economic Data
Tuesday: ISM (Institute for Supply Management) Manufacturing Index. JOLTS (Job Openings and Labor Turnover Survey).
Wednesday: ADP (Automated Data Processing) Employment Report.
Thursday: Factory Orders. Jobless Claims. ISM (Institute for Supply Management) Services Index.
Friday: Employment Situation.
Source: Econoday, January 28, 2022The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
This Week: Companies Reporting Earnings
Tuesday: Alphabet, Inc.(GOOGL), Advanced Micro Devices, Inc. (AMD), Exxon Mobil Corporation (XOM), PayPal Holdings, Inc. (PYPL), General Motors Company (GM), Gilead Sciences, Inc. (GILD), Starbucks Corporation (SBUX), United Parcel Service, Inc. (UPS), Stanley Black & Decker, Inc. (SWK).
Wednesday: Meta Platforms, Inc. (FB), AbbVie, Inc. (ABBV), Qualcomm, Inc. (QCOM), Thermo Fisher Scientific, Inc. (TMO), Spotify Technology (SPOT), TMobile US, Inc. (TMUS), D.R. Horton, Inc. (DHI).
Thursday: Amazon.com, Inc. (AMZN), Ford Motor Company (F), Snap, Inc. (SNAP), Eli Lilly and Company (LLY), Fortinet, Inc. (FTNT), Skyworks Solutions, Inc. (SWKS), Honeywell International, Inc. (HON), Prudential Financial, Inc. (PRU).
Friday: Air Products and Chemicals, Inc. (APD), Bristol Myers Squibb Company (BMY).
Source: Zacks, January 28, 2022Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
“A very great vision is needed, and those who have it must follow it as the eagle seeks the deepest blue of the sky.”
– Tȟašúŋke Witkó (Crazy Horse)
Natural Disasters Have Tax Implications, Too
No one likes to think of natural disasters and what might happen, but it’s always good to be prepared. A few things may happen after a disaster when it comes to taxpayer relief.
The first is that the IRS may give taxpayers more time to file and pay. If your address is in an area qualifying for IRS disaster relief, you will automatically receive more time to file your return and pay taxes.
In addition, taxpayers may qualify for a casualty loss tax deduction for people who have damaged or lost property due to a federally declared disaster.
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov7
A Healthy Side
Think you can’t enjoy good flavor while also prioritizing eating healthy? Think again! This cauliflower “mac and cheese” is delicious, decadent, and easy to make.
One head of cauliflower
Salt and pepper to taste
¼ cup sour cream or Greek yogurt
½ cup shredded cheddar cheese
Cut the cauliflower into small florets.
Boil the cauliflower for about 5 minutes.
Drain and return to the pot on a low heat setting.
Add in the salt, pepper, and sour cream/Greek yogurt and stir until combined.
Stir in the cheese until melted.
Garnish with fresh parsley and enjoy!
Tip adapted from Tasty8
Two children are born in the same hospital (and in the same hospital room) in the same year, month, day, and minute. They have the same two parents, yet they are not twins and have no brothers. How is this possible?
Last week’s riddle: A woman sailed into the Bahamas with her boat on the 28th of April. She stayed in the Bahamas for three weeks and then left in April. How is this possible? Answer: The name of her boat is April.
Woman walking with friend (Canis lupus familiaris), White Sands National Monument, New Mexico.
Footnotes and Sources
1. The Wall Street Journal, January 28, 2022
2. The Wall Street Journal, January 28, 2022
3. The Wall Street Journal, January 28, 2022
4. CNBC, January 24, 2022
5. The Wall Street Journal, January 26, 2022
6. The Wall Street Journal, January 26, 2022
7. IRS.gov, September 7, 2021
8. Tasty.co, September 30, 2021
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
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