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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



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