Skip to main content

Sound Advice: May 18, ,2022

The Pendulum Swings Both Ways 

For many measures, the average or normal values are rarely the most common.  For the stock market, prices tend to spend more time closer to the extreme ends of the traditional spectrum.  What comes along with this tendency is the expectation that the current path is the one that’s most likely to be followed.

Not only is there an expectation of more of the same, but optimism grows as prices climb and pessimism increases as prices drop, which from an investment standpoint is counterproductive.  Lower prices mean you’re getting more for your money.  And vice-versa.  Yet, investors are increasingly spooked by the latest reversal in stock prices.


We’ve been through this before and we’ll go through it again.  The pullback that’s been under way since the beginning of the year reflects the long-term process of digesting ongoing economic and geopolitical developments.

It’s all part of a much broader picture.  Recent pullbacks such as those of early 2020 and late 2018 came and went.  So did the brutal plunge of 2008-2009 in which the leading indexes dropped in half.

When the going gets rough, it’s essential to remember that downturns are always followed by recoveries to even higher levels. 

N. Russell Wayne, CFP®

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

 

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

Comments

Post a Comment

Popular posts from this blog

Sound Advice: September 21, 2022

The Professional Approach To Stock Selection There are various approaches to stock selection, but the two that predominate are fundamental analysis and technical analysis.  Fundamental analysis is a numbers-based method that evaluates key factors such as income and financial health, including the past, present, and future.  Technical analysis emphasizes movements and formations of stock prices. Fundamental analysis is based on factors that over time have proved to have a meaningful impact on stock price movements.  The optimal picture of corporate profitability is steady growth, both in the past and, prospectively, in the coming years.  Steady growth is rewarded by higher valuations of underlying earning power than those accorded companies with erratic progress. When professionals screen (filter) the data of the broad universe of stocks, they look for companies that move ahead every year, regardless of the prevailing economic conditions.  Although high pas...
Post a Comment
Read more

Sound Advice: July 26, 2023

Is Day Trading a Good Idea? Day trading can be both exciting and potentially profitable, but it also comes with significant risks and challenges. Whether it's a good idea depends on several factors, including your financial situation, risk tolerance, time commitment, and knowledge of the markets. Here are some considerations to keep in mind: Risk and volatility: Day trading involves buying and selling securities within a short time frame, often within the same day. This exposes you to the inherent volatility and risks of the market. Prices can fluctuate rapidly, and unexpected events can have a significant impact on stock prices, making it challenging to consistently make profits. Time commitment: Day trading requires a substantial time commitment. It involves closely monitoring market movements, conducting research, and executing trades. It can be stressful and demanding, as you need to be actively engaged in the market during t...
Post a Comment
Read more

Sound Advice: May 31, 2023

High Yields, Yes!  But There Are Risks Now that failure to get much done in Washington seems to be the bottom line for lots of talk, but little action, it’s hard not to wonder whether we’re missing something.  Yes, the Federal Reserve Board has aggressively raised interest rates in the hope of putting a damper on excessively high inflation, but one would think that there might be some good news as a result of these efforts. The hoped-for result is that inflation is indeed moderating.  Also of importance, though, is the sharp improvement in interest rates on fixed-income investments, usually a.k.a. bonds.  For much of the past decade or more, interest rates have languished at or near historical lows, which created considerable shortfalls for folks living on fixed incomes. Thanks to the Fed’s hikes, the returns on bonds and the like are beginning to be of interest.  But . . . and that’s a big but . . . there are risks involved. For short-term investing at ...
Post a Comment
Read more