Skip to main content

Sound Advice: May 25, 2022

This Time It’s NOT Different 

Whether economic times are good or bad, there always seem to be wizards making weighty pronouncements that suggest dramatic changes have taken place in the fundamentals underlying the economy and the marketplace.  If in fact one of these turns out to be on target, it most assuredly was as probable as winning a lottery.  The reality is that over time the world of business and investment markets moves ahead in cycles, not in a smooth linear pattern.

Interest rates rise and fall.  Inflation surges and moderates.  Corporate profits climb, with hiccups along the way.  And there’s always geopolitical trouble under way or in the wings.

There have been numerous events that could have earned the label “different”, but none stopped the ongoing rise in the stock market.

In the early 1970s, we were mired in the Vietnam war.  Now the conflict is in Ukraine.  During the late 1970s, interest rates soared into the mid-teens.  Now they’re in the low-single digits. From time to time, the unemployment rate has vaulted above 10%.  Now it’s 3.6%.  Not only that but the latest rate of jobless claims has fallen to the lowest level since 1969.

What else? How about the plunge in the tech stocks, many of which had led the stock market advance over the last few years.  Indeed, Apple, which through the first three months of 2022 held up well, has dropped more than 20% since the end of March.  Facebook (now Meta Platforms) is down by almost 50% year to date.  For the same period, Google (now Alphabet) has fallen about 30%.  Even Microsoft, which had been a stalwart, is off by 23%.

Despite the picture that appears to be painted by sharply reduced stock prices, these are healthy companies that have years of growth ahead of them.  If there had been good reason to find these (and many others) of investment interest, there’s even more reason to think so now. 

The U.S. economy may stutter, but it has before and will again.  There’s nothing different about that.  Nor is the recent market pullback and the prospect of inevitable recovery.

No, it’s not different this time.

N. Russell Wayne, CFP®

Sound Asset Management Inc.

Weston, CT  06883

203-222-9370

www.soundasset.com

www.soundasset.blogspot.com

 

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

 

Comments

Post a Comment

Popular posts from this blog

Sound Advice: February 21, 2024

800-000-0000 That’s 800-000-0000 Again, 800-000-0000 That’s the typical closing for the hard sell commercials that are increasingly polluting media airwaves.   These are the commercials for products or services you rarely need or most definitely should avoid. A substantial number are on behalf of groups of attorneys who would have you believe that you and many others may be entitled to cash compensation for having used or being exposed to some evil item or substance some time in the last few decades.   The pitch always includes a comment that there’s no cost to you unless there is a settlement in your favor. Much of this is rubbish, but when the appeal suggests that there’s nothing to lose, why not take a shot.   And, as you would expect, “advisors” are standing by 24/7 to take your call and help get the process in motion.   What kind of advisor would be available at 3 a.m.? One version of this approach pops up every year between October 15 th and Decemb...
Post a Comment
Read more

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