Weekly Market Insights: 3-9-2022 Ukrainian War Stresses Economy
We are watching this market decline with little surprise on our side. The NASDAQ, representing growth, has officially declined 20.60% from its high on November 22nd of 2021. The Dow is down 11.06% from its high on Jan 5th and since it represents more value than growth, it’s lower decline would make sense at the present time. The S&P 500 set it’s high on Jan 4th at a value of 4,818 and has since fallen 12.6%.
Are we there yet? The answer, at present would be nope.
Warning: DO NOT let your emotions and feelings be hijacked right now. Money and emotion make poor bedfellows. What’s happening overseas combined with what is happening here with inflation is a potent mix of emotional elixir that has the potential of pushing investors to make poor long-term decisions based on how they are “feeling” in the short-term.
Remember: FEAR = False Evidence Appearing Real
In 2008, Fear said:
We will loose everything and never be able to retire.
Reality was that accounts had recovered by 2012 for investors.
In 2016, Fear said:
Trump is not going to win, that would be ridiculous.
Reality was that Trump did win and began an interesting new era for American Politics
A trade war with china will be devastating.
Reality was that it came with it’s challenges, the markets rallied to historic highs.
The world as we know it is coming to an end, the pandemic will kill or contaminate everyone.
Reality is that yes, it has changed our world, and many have passed as a result. We have also made breakthroughs in vaccines and technology and are on track to recovering.
The point is that when you can control your fear, you can benefit from others not being able to control their fears. A bear market does not mean a bad market, it means a different market.
The increase in Geopolitical Tensions with Russia’s invasion of the Ukraine has certainly not put a damper on everyone’s concerns and fears of late. This could continue for some time but with the sanctions now being placed on Russia’s Oligarchs, we might finally see President Putin yield.
This situation, although was ill timed, was not the reason for the market conditions as a whole, just a seemingly supportive headline. The primary reason for the market condition changing from Bullish to Bearish is inflation and its effect on the economy. We are keeping a trained eye on the Fed’s approach and Wall Street’s response to interest rates and inflation among other points of interest.
We have been reassigning and rebalancing clients since October of 2021 in preparation for a change to market conditions and will continue doing as the data suggests.
At the present, just know that a change in market conditions from bullish to bearish is not something to be taken lightly nor is it to be feared. Changes such as these happen but once every several years and could last for quite some time. Preparing for a harsh winter isn’t nearly as painful as not preparing for one.
Till next time, enjoy the warmer weather!
General Market Commentary
War in Ukraine weighed on stocks as investors assessed the economic impact of continued hostilities, expanding economic sanctions, and potentially higher inflation due to rising oil prices and new stresses on the global supply chain.
The Dow Jones Industrial Average fell 1.30%, while the Standard & Poor’s 500 lost 1.27%. The Nasdaq Composite index slid 2.78% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 3.21%.1,2,3
Another Volatile Week
The uncertainty introduced from Russia’s invasion continued to whipsaw the financial markets last week. Intensifying hostilities early in the week sent stocks sharply lower as oil prices surged and a flight to safety drove investors to buy bonds.
Stocks rebounded mid-week following the release of positive economic data and Congressional testimony by Fed Chair Jerome Powell, who said the Fed is likely to move forward on rate hikes, but would proceed cautiously. Investor enthusiasm was short-lived, however, as stocks resumed their decline on Thursday into Friday despite a strong employment report.
Fed Chair Powell told Congress on Wednesday that he would propose a 25 basis point increase in the federal funds rate when the Federal Open Market Committee meets in mid-March. He conceded that the invasion of Ukraine and the economic sanctions against Russia introduced a level of uncertainty and that the Fed would proceed carefully with monetary tightening.
Powell also testified that he would not have the Fed’s strategy to shrink its balance sheet finalized before the mid-March meeting. Alluding to the urgency of fighting inflation, Powell left the door open to more aggressive rate hikes later in the year.4
This Week: Key Economic Data
Wednesday: JOLTS (Job Openings and Labor Turnover Survey).
Thursday: Consumer Price Index. Jobless Claims.
Friday: Consumer Sentiment.
Source: Econoday, March 4, 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: Guidewire Software, Inc. (GWRE).
Wednesday: Asana, Inc. (ASAN).
Thursday: JD.com, Inc. (JD), Ulta Beauty, Inc. (ULTA), DocuSign (DOCU), Rivian Automotive, Inc. (RIVN).
Source: Zacks, March 4, 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.
“Life shrinks or expands according to one's courage.“
– Anaïs Nin
What is the Lifetime Learning Credit?
The Lifetime Learning Credit (LLC) is a tax credit for qualified tuition and related expenses. It can help pay for undergraduate or graduate studies, as well as courses to acquire or improve your job skills. The credit is worth up to $2,000 per tax return.
Another good thing about this tax credit is that it’s available for an unlimited number of tax years, unlike the American opportunity tax credit that is only for the first four years at an eligible institution.
To claim the LLC, you must be paying qualified education expenses for a higher education and be enrolled at an eligible educational institution. Check out the IRS guidelines for more details and whether or not you may qualify.
* 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.gov5
How to Make a Healthy Cup of Joe
We have good news for all you coffee drinkers out there! There are many ways to make your cup of Joe in the morning a little healthier so you can feel good about your morning routine.
Here are some things to remember next time you make a cup of coffee:
Be wary of adding too much sugar to your coffee. If you like your coffee sweet, use a natural sweetener like stevia, cinnamon, honey, or agave.
When possible, choose organic coffee. Organic coffee is less likely to have been sprayed with synthetic pesticides. Also, shop local coffee beans if possible!
Avoid drinking too much coffee and avoid drinking coffee past 2pm, as it may affect your sleep cycle.
Coffee is one of the most popular drinks in the morning and it’s not all bad. Just be aware of what you put in your coffee, how much you’re drinking, and when.
Tip adapted from Healthline6
There is a word (four letters long) that begins with the letter I. If you put the letter A at the front of this four-letter word, it becomes a five-letter word which is pronounced exactly the same. Name both words.
Last week’s riddle: You have a can of soda in your hand and someone tells you to drink the bottom half of it first. How can you do that? Answer: Use a straw.
Three giraffes take shade under an acacia tree, Serengeti, Mara, Tanzania.
Footnotes and Sources
1. The Wall Street Journal, March 4, 2022
2. The Wall Street Journal, March 4, 2022
3. The Wall Street Journal, March 4, 2022
4. The Wall Street Journal, March 2, 2022
5. IRS.gov, January 26, 2021
6. Healthline.com, 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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