Forefront’s Monday Market Update
So, who’s buying right now?
The S&P500 is up about 740% since the March of 2009 bottom, making this the longest, and one of the most prosperous bull markets in history. This period of time will be taught about in our children’s college economics class.
Since 2009 though, we have seen the following drawdowns or “corrections”:
-16.0%
-19.4%
-13.3%
-10.2%
-19.8%
-33.9%
We are coming up on 13 years since the lows of 2009, and in just about half of those years, we have seen a double-digit drawdown for the broader markets. Just like in years past, we are seeing another drawdown that seems inevitable to cross over to the double digits for 2022. So now the real question for everyone is, who’s buying right now?
Scared when market is greedy, and greedy when market is scared
Market timing is something I am asked about constantly. Countless clients, and prospective clients alike ask me about good times to buy, or should we sell now and get back in later etc. The problem with timing the market is that you need to be correct twice. First when to sell, and again, and much more difficult, when to buy back in.
Does anyone have the incredible urge to commit more dollars to the market right now, as we have watched broad markets sell off nearly 20% since Thanksgiving? Most of you who are being honest with yourself will answer no, because the market right now is scary. It is dropping hard and fast, and the talking heads on TV keep talking about recessions and depressions, and our emotions are spinning into panic.
Perspective
I know that market drops are going to happen, and they happen way more often than the general public thinks or remembers. The chart above shows you just how often markets come down, but as a financial planner, I know that some numbers on a chart are not going to help your nerves or emotions.
It’s why my team and I have been prepping the portfolios for this since last February, when markets had generally peaked during the meme stock mania. Times like these, or the 63% of the years when we see a 10% or worse decline, or 26% of the years when we see a 20% or more decline is why someone selling you a portfolio, and how smart they are doesn’t work.
Whether you are 25, or 40, or 70 your financial structure CAN NOT be haphazard, and must take into consideration volatility. This doesn’t mean day trading, or zigging and zagging to try and maneuver with the market, it means having ample cash so your emotions don’t spill from fear and general trepidation to all out panic. Your plan needs to account for short term needs or emergencies while balancing long term obligations and goals.
The basics
For those of you who know me, you know I LOVE the NY Yankees. I bring my son and daughter to dozens of games a year, and watching my son play baseball fills me with joy, except for when he swings a bat.
AJ, my son, is 8, and swings a baseball bat like he is a mix of Aaron Judge and Ken Griffey Jr. except he doesn’t actually make contact. He takes a ridiculous upper cut swing because “it’s all about launch angle dad” as he likes to tell me.
This off-season, I have been making him hit off of a batting T again, and focusing on the basics. Eye on the ball, step towards the mound, level swing, follow through. The change has been amazing. Investing is the same way.
Over the next few weeks, you will start to see the commercials and talking heads on TV trying to sell you hedging strategies. Maybe they are annuities with downside protection, some sort of option hedging strategy, or maybe a simple pitch to buy gold and silver. Regardless, unscrupulous salesmen will take this opportunity of concern and mild panic to pounce.
You don’t need to do anything different as long as you have a plan in place. In fact, like I asked earlier who’s buying right now, and the answer is most of us should be buying right now. As interest rates are set to move higher, and markets have come down, now is the time to start to adjust your bond allocation, put some of that cash to work, and increase your 401K contribution. If you don’t have an advisor or don’t have a plan in place, let’s chat, and get that fixed.
So What?
So how does this impact all of you?
- Market drops and corrections are more common than we think
- The way to get through them is to HAVE A PLAN
Stock market calendar this week:
| MONDAY, JAN. 24 | |
| 9:45 AM | Markit manufacturing PMI (flash) |
| 9:45 AM | Markit services PMI (flash) |
| TUESDAY, JAN. 25 | |
| 9:00 AM | S&P Case-Shiller national home price index (year-over-year change) |
| 9:00 AM | FHFA national home price index (year-over-year change) |
| 10:00 AM | Consumer confidence index |
| WEDNESDAY, JAN. 26 | |
| 8:30 AM | Advance report on trade in goods |
| 10:00 AM | New home sales starts (SAAR) |
| 2:00 PM | FOMC statement |
| 2:30 PM | Fed Chair Jerome Powell news conference |
| THURSDAY, JAN. 27 | |
| 8:30 AM | Initial jobless claims |
| 8:30 AM | Continuing jobless claims |
| 8:30 AM | Gross domestic product (SAAR) |
| 8:30 AM | Final sales of domestic product (SAAR) |
| 8:30 AM | Durable goods orders |
| 8:30 AM | Core capital equipment orders |
| 10:00 AM | Pending home sales index |
| FRIDAY, JAN. 28 | |
| 8:30 AM | PCE inflation (month-to-month change) |
| 8:30 AM | Core PCE inflation (month-to-month change) |
| 8:30 AM | PCE inflation (year-over-year change) |
| 8:30 AM | Core PCE inflation (year-over-year change) |
| 8:30 AM | Real disposable incomes |
| 8:30 AM | Real consumer spending |
| 8:30 AM | Personal income (nominal) |
| 8:30 AM | Consumer spending (nominal) |
| 8:30 AM | Employment cost index |
| 10:00 AM | UMich consumer sentiment index (final) |
| 10:00 AM | UMich 5-year inflation expectations (final) |
Most anticipated earnings for this week:
