Updated: Jan 25
It is not often you see the Down Jones Industrial Index down 1,000 points in a single day!
Two years of a "mis-behaving market " has worn my nerves down to a fray! Two years of rising stock prices that did not match up with reality. Last week I wrote about the tens of billions of dollars that have flown into the stock market: I think you can assume those were not the smart dollars.
What else wears me out? A market update like the one I got today from "the smart guys:"
"Risk-off sentiment continued this week with ongoing concerns over inflation and a tighter monetary policy backdrop. In the U.S., the S&P 500 Index fell for its third straight week – losing 5.7% for the week ending January 21st. This marked the largest weekly decline for the index since March 2020. Notably, value continued to outperform growth equity with the Russell 1000 Value Index declining 4.6%, while the Russell 1000 Growth Index fell 7.0% during the week as rising rates pressured higher valuation growth companies. Fixed income markets continued to digest the Fed’s hawkish policy shift amid persistent inflation pressures. In the U.S., the yield curve flattened with the 10-year and 30-year yields falling two and five basis points, respectively. The front end of the yield curve moved marginally higher; the 2-year Treasury yield increased three basis points during the week and hit 1.0% for the first time since 2020."
Really? What does this even mean? How much does it tell you? And, more than that, what are you supposed to do?
Think about this stage of the market like this: if you went outside at noon and it was dark, you'd know something was very wrong...or was about to go very wrong!
Apply that same logic to your portfolio: we have spent the last 2 years talking about the growing risks and that there is a strategy for markets like this: build up cash.
Over the last two years, clients have asked me; "Why do I have so much cash when cash is earning nothing?" My answer ALWAYS comes out of my "time-tested-worn-but-reliable-play-book."
The best thing to own when the market had gone up too-fast-for-too-long is cash.
When you KNOW interest rates will be going up, cash is king."
The best way to get through the a lifetime of market ups and downs the market gives us is to let your cash accumulate until there is a smart time to buy.
Today, every client has cash and is ready to add to their portfolio...both stocks and bonds...when the timing is smart.
For clients who have not filled in the Totum Risk Tolerance Survey, watch your email inbox. Please complete it as soon as possible, and lets get ready to invest some of that cash!
Please know I understand that this is not an easy time and that it is very un-nerving. Just know...we've been through it many times before, and we will get through this time, too.