Wow, where has the first month of the year gone, its seems like just last week we were celebrating the holidays! The year has gotten off to a fast start and so has the market. As expected, volatility has been way up this year in the market. With this, I wanted to share some more thoughts on the market and what we have our eye on.
- Recently the Nasdaq entered “correction” territory, meaning it dropped over 10% from its high
- In early December, just five stocks—Microsoft (MSFT), Google (GOOG), Apple (AAPL), Nvidia (NVDA) and Tesla (TSLA)—accounted for 51% of the S&P 500’s return since April, according to Goldman Sachs research.
- Think about that: 5 companies making up over half of the total return of an index that has over 500 companies. 1% of companies making up 50% of the return.
Here’s my takeaway from the above:
- Corrections are normal, and usually happen at least once during any calendar year; I personally think we will see several corrections and increased volatility during 2022.
- The S&P 500 should NOT your benchmark for comparing returns in any individual portfolio unless you are willing to directly take the full downside risk (think back to 2008-2009 when S&P fell over 50% peak to trough!).
- Most non-media biased economists still are predicting decent- but lower than the last couple of years- returns in equities in 2022. I can see that happening, but my 20 years in this business is telling me to not be caught off guard or surprised if they are wrong and we hit the next down market soon.
What should you do?
- Step back, focus on the things that matter during times of volatility: how much cash do you have in your emergency fund? Do you have cash set aside for taxes and any other short term expenses? Remember: You don’t lose money in the stock market if you don’t sell stocks while they are down. Simple, but such an important reminder 😊
- I realize it’s human nature to compare portfolios to the wrong benchmarks, and also to shift into “nervous Nelly” mode at the first taste of volatility, even after the market has spoiled us for a few years. Recognize these emotions as they come up, don’t get them any power over your long term plan and vision you have crafted with your financial team.
Just wanted to share some thoughts, observations, and wisdom. If you are a client of ours, you are prepared for an up or down market year. We don’t react to the market, we plan and prepare for this. That’s all for now……
Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. The material is general in nature. Past performance may not be indicative of future results. Any opinions are those of David Adams and not necessarily those of Raymond James.