Skip to main content

Sound Advice: December 1, 2021

Delta, Mu, Omicron, etc.

Only eight months ago, I wrote about the regularity of market drops and what always follows.  Over the last 40 years, the Standard & Poor’s 500 Index has had average annual interim drops of 14.3%.  More than half of those pullbacks were greater than 10%, but a full recovery and even higher prices came after the dips every time.

Given the stretched valuations that have prevailed for an extended period, the question was never whether there would be a pullback, but what would set it off.  Stretched valuations alone don’t start selloffs and they often persist far longer than one would expect.  In the past, however, the trigger for market hiccups has typically been unusual geopolitical events.

Concern about the pace of economic progress is another trigger, as is what lies ahead for interest rates.  Yet, much of the recent news about business has been encouraging and prospective increases in interest rates will probably be gradual.  Although there are and will be further disruptions due to supply chain constraints, the corporate community continues to operate under favorable conditions.

What spooks the market is a scary word: uncertainty.  When the pandemic began in March, 2020, the immediate reaction was panic.  Infection rates soared, therapies were virtually nonexistent, intensive care units in hospitals became overloaded, and there was no end in sight.

Fast forward one year and the picture brightened considerably.  Vaccines were available, therapies were being developed, infection rates slowed, and there seemed to be a likelihood that the world was not coming to an end. 

What’s more, most people were helping the situation by following sensible rules for social interaction.  The lessons learned over the past 20 months will assist as we move ahead.

So here we are facing another virus variant, which has yet to be sorted out.  Current vaccines may work or need modification.  The same is true for current therapies.  No doubt, it will take time to make the adaptations that will be needed, but they will be made.

Uncertainty brings discomfort, but cooler minds will lead the way to a calmer future.  This, too, shall pass. 

N. Russell Wayne, CFP®

Any questions?  Please contact me at nrwayne@soundasset.com 

Comments

Post a Comment

Popular posts from this blog

Sound Advice: January 3, 2025

2025 Market Forecasts: Stupidity Taken To An Extreme   If you know anything about stock market performance, you can only gag at the nonsense “esteemed forecasters” are now putting forth about the prospective path of stocks in the year ahead.   Our cousins in the UK would call this rubbish.   I would not be as kind. Leading the Ship of Fools is the forecast from the Chief Investment Strategist at Oppenheimer who is looking for a year-end 2025 level for the Standard & Poor’s Index of 7,100, a whopping 21% increase from the most recent standing.   Indeed, most of these folks are looking for double-digit gains.   Only two expect stocks to weaken. In the last 30 years, the market has risen by more than 20% only 15 times.   The exceptional span during that time was 1996-1999, which accounted for four of those jumps.   What followed in 2000 through 2002 was the polar opposite: 2000:      -9.1% 2001:     -11.9% ...
Post a Comment
Read more

Sound Advice: March 10, 2021

The ABCs of Stock Picking After decades of analyzing stocks (and funds) and investing for clients, I'm happy to share in plain English what's involved, what works, and what doesn't.  Keep in mind the reality that successful stock picking is an effort to maintain a good batting average. In baseball, a batting average of .300 or better is considered quite good.  With stock picking, you need to do better than .600, which means you have many more winners than losers. No one gets it right all of the time.  It's not even close.  Wall Street shops all have their recommended lists and the financial media regularly hawk 10 stocks to buy now. Following that road usually is a direct route to disaster.  Don't be tempted. Let's begin with the big picture: The stock market goes up and down over time, but the long-term trend is up.  When there's a rally under way, everyone feels like a genius.  When the market hits an air pocket, though, with few exception...
Post a Comment
Read more

Sound Advice: January 15, 2025

Why investors shouldn't pay attention to Wall Street forecasts   Investors shouldn't pay attention to Wall Street forecasts for several compelling reasons: Poor accuracy Wall Street forecasts have a terrible track record of accuracy. Studies show that their predictions are often no better than random chance, with accuracy rates as low as 47%   Some prominent analysts even perform worse, with accuracy ratings as low as 35% Consistent overestimation Analysts consistently overestimate earnings growth, predicting 10-12%                 annual growth when the reality is closer to 6%.   This overoptimism can                 lead investors to make overly aggressive bets in the market. Inability to predict unpredictable events The stock market is influenced by numerous unpredictable factors, including geopolitical events, technological changes, and company-specific news.   Anal...
Post a Comment
Read more