Take a look at last week’s market recap from Joe Gallemore, CIMA® Partner & Director of Investment Management for Argent Bridge Advisors. Watch the video now!
- The stock market has started off the year on a very bumpy ride. Most stock indexes have trended down considerably these past two weeks and daily volatility is up.
- The primary drivers for this market turbulence include continued high inflation, the Federal Reserve signaling it will start raising interest rates sooner than anticipated, and a generally expensive market!
But while it’s not fun to watch account values go backwards, it’s not all bad news here.
- First, the market was at a place lots of strategists consider expensive. The first week of January, the S&P 500 index was still marking new All-Time Highs. Trees don’t grow to the sky, and over the past 72 years, the S&P 500 experiences a correction of 10% or more about every 2 years. So this repricing of stocks is not only fairly regular, but also is a necessary mechanism for keeping equity prices in check.
- Second, not all pockets of the stock market are behaving the same. Growth stocks are getting clobbered in January, while Value stocks are only down about a quarter to half as much. Also, International stocks, and especially Emerging Markets, areas we’ve mentioned a lot on Cup of Joe, are faring much better than US stocks… EM was +1.03 so far as of Friday, 1/21.
- So let’s remember that volatility like this was expected. Trying to time the peaks and troughs or invest in yesterday’s market is a losing game. Staying invested and being diversified are the time-tested methods to weather market turbulence and participate in subsequent rallies.
- And remember these last points! Because we will undoubtedly mention them again if this volatility continues.