Monday Market Update – May 9

May 9, 2022

Forefront‘s Monday Market Update

Why Are You Investing?

If I ask anyone reading this today what the market returns for last week were, I will hear answers of down 8% or down 5%.

The S&P500 was down .16% last week. You read that right, we were down less than a quarter of one percent. We opened up the week on the S&P500 at 4,130 and ended the week at 4,123. For those who reminded themselves WHY they are investing it was a normal week, for those glued to their televisions or computer screen watching ever red and green move, it was an emotional rollercoaster.

Don’t get me wrong, last week was awful, the emotional rollercoaster of the stock market was nauseating, and it felt like it would never end.

Teachable Moment

My son, AJ, beats my daughter, Priya, at games and sports all the time. He is older, and naturally more athletically coordinated at the moment, and doesn’t hesitate to let Priya know that he has won.

Priya never gets upset, but this weekend Priya finally beat AJ in a board game. He was upset, and she hugged him and told him that he would win next time.  Sometimes teachable moments sneak up on you, and this was one of them. I made sure to pull AJ aside and point out the difference in how he acts when he wins, and how Priya acts. I think he understood.

Last week was an incredible teachable moment for all of us on what it means to be investors. A major value of my firm, and my financial planning style is to reiterate to clients that when it comes to investing, less is more.

Let me ask you a question, who do you think was the winner of last week? Those who furiously traded in and out of the market, not getting up to go to the bathroom for fear of missing something, or those who went about their lives, not even paying attention to what was happening in the market? Less is more when it comes to long term investing.

How to survive the current market

We are all investing for the future, and although the portfolios of the two people in my example will be wildly different, the principal of why you are investing is the same. You might have started your first job six months ago, or you might have left the workforce 6 years ago, regardless, identify WHY you are investing.

We save and invest our money to provide us with financial security in the future. Investing is the bedrock to freedom in the future to do what you want, when you want, for however long you want. You might not need millions of dollars to be happy, but it is tough to find peace when you are constantly worrying about money. Understand that to be a part of long-term economic growth, times of short-term discomfort are inevitable.

Write it down

My clients will remember a time when I weighed 300+ pounds. I knew I needed to make a change but couldn’t get myself motivated. I was asked to write down everything I was eating for a week, but also to keep a journal and to just write down how I felt overall. It really helped me realize where my emotions were sabotaging my plan, and it changed how I approached my goals moving forward.

I am constantly telling my clients to keep an investing journal; it is something I do daily. If you really think about what a journal entry for last week might look like, it probably goes something like this:

I am selling my stocks because the losses are just too painful. Regardless of corporate earnings, and actual economic fundamentals continuing to be strong, I am going to go to cash and buy back in when the market goes back up.”

When you read that back to yourself it should say, I am going to sell low, and buy back higher, because that is what happens to almost all investors whose plan is guided by emotion.

Look at the past, plan for the future

No one Is crazy. Those who lived through and remember the high inflation years of the late 70’s and early 80’s has a much different feeling on inflation than those born in the 90’s who have never really seen bad inflation until now. Neither of those people is crazy.

Looking back at your past behavior, is a good indication of what future behavior will look like in similar situations. Understand who you are, and your likely reaction to market volatility and uncertainty. As you think about who you are, make sure you are using that knowledge to shape your financial plan for the future. Your financial plan should take into consideration who you are, and how you react to help make sure your emotions aren’t pushed to that limit, and to avoid making the same mistakes you made in the past.

What’s next?

I wish I could tell all of you with certainty what is going to happen in the market this week, or going forward. What we all have to remember is there has never been a time where markets don’t recover. The market goes up roughly 3 out of every 4 years, and that builds complacency within all of us. We forget that the price to pay for averaging double digit returns over the past decade are times of extreme market volatility. This isn’t the first time, and it won’t be the last time, but we recovered after falling 20% in December of 2018, and after a global pandemic dropped the market 36% in a month. The market will recover, it always does, but your success moving forward will be dictated by your behavior during this time, not your intelligence.

So What?

So how does this impact all of you?

  • Less is more when it comes to long term investing.
  • Success moving forward will be dictated by your behavior during times of volatility, not your intelligence.

Stock market calendar this week:

10:00 AM Wholesale inventories (revision)
11:00 AM Consumer 1-year inflation expecations
11:00 AM Consumer 3-year inflation expecations
6:00 AM NFIB small-business index
11:00 AM Real household debt (SAAR)
8:30 AM Consumer price index
8:30 AM Core CPI
8:30 AM CPI (year-over-year)
8:30 AM Core CPI (year-over-year)
2:00 PM Federal budget
8:30 AM Initial jobless claims
8:30 AM Continuing jobless claims
8:30 AM Producer price index (final demand)
8:30 AM Import price index
10:00 AM UMich consumer sentiment index (preliminary)
10:00 AM UMich 5-year inflation expectations

Most anticipated earnings for this week:

About Amit: I am a first generation American, the son of a working-class Indian family, and I lived through my parents’ struggle to find their place in this country, to put down roots that would sustain them as well as their children in a new land. As they encouraged me to excel in school and fostered my hobbies and interests, I was keenly aware of the dynamic between them. I understood that there was a difference between where they came from individually and where we were now. They worked hard in their individual capacities, but they weren’t always on the same page about financial issues – and that can make or break a family’s future. I didn’t know it at the time, but this laid the groundwork for my passion towards financial services and helping families succeed.