In 2021, we had a couple of 5% pullbacks on the major indexes that were immediately bought, pushing markets to new highs. Many have been speculating a 10% true correction is in the cards.
Well, here it is…. the major indexes have corrected. Before a correction, most investors believe corrections are good in the intermediate and longer terms. After a correction, investors typically say “that was a buying opportunity.”
During a correction, thoughts turn to “…oh boy, how much worse will this get?! When will we hit bottom and start moving forward? Is this 2000? Is this 2008/09?”
Investors start paying more attention to what commentators are saying, often times forgetting the extreme bias they often carry!
The fact is, the Federal Reserve has been spraying massive amounts of liquidity on the markets since the beginning of Covid. Last summer, when the economy was on fire, the Fed decided to continue this liquidity surge suggesting inflation was only temporary.
Jerome Powell and staff have NOW decided inflation is a huge risk, and appear to be getting ready to pull out all techniques to slow it down.
The Fed is now aggressively slowing its monthly bond purchases with the finish line in March. The Fed is also expected to raise the discount rate in March. Yesterday (Monday) morning, rumors suggest they may hike .50% instead of .25%.
Investors want to know — how high will rates go??? How will this impact corporate profits? Will the Fed raise rates, pushing mortgage rates/automobile loan rates/corporate borrowing rates so high that we end up in a recession?
Of course, no one has the answers to these questions. We certainly know markets have a habit of overshooting too high, then overshooting too low. The markets seem to change direction when it’s not expected.
What should be paramount to most investors is making sure your investment portfolio is properly positioned based on your current, intermediate and longer–term income needs. If this is the case, history has shown, the best course of action is to continue your current allocation, looking to rebalance your portfolio when appropriate.
If you have additional cash on the sidelines, adding to positions during periods of weakness typically proves rewarding… you just need to be patient!!
Markets Up Last Week
Last week, 170 of the S&P-500 companies reported earnings with 77% beating profit estimates and 68% topping sales forecasts. This week we’ll hear earnings from Alphabet, Amazon, Bristol Meyers, Chubb, General Motors, Meta and several more companies.
Last week the markets were down as Jerome Powell spooked the markets until Friday. All of a sudden on Friday, the markets moved higher, pushing most indexes up for the week.
The Dow Jones rose 1.34%, the S&P 500 .79% and the Nasdaq inked a gain of .02%. The Russell 2000 Small cap index retreated (.97%).
Over the pond, foreign stocks dropped (3.61%) and Emerging Market stocks lost (4.26%).
Bond yields, as expected, rose with the 2-Year US Treasury ending last week with a yield of 1.17% and the 10-Year with a yield of 1.78%.
Social Security Webinar
A reminder we’ll be presenting our Virtual Social Security Workshop in conjunction with Jefferson Hospital, next Tuesday, February 8th @ 6pm. For those who have not yet filed for benefits, this will be your time to learn the rules and get all of your questions answered. Feel free to pass along this invitation to others, as all are welcome to join the webinar! REGISTER HERE
