The WWM Financial advisors, Certified Financial PlannersTM and portfolio managers gather to discuss their take on current market conditions as of March 9, 2022. How can market volatility affect your investment portfolio? Once you consider the war, supply chain issues and rising inflation there can be a large shift in focus. They further discuss economic indicators and technical indicators.
We realize there may be more questions than answers right now regarding your personal investments and how exposed you are to the market. For peace of mind, to confirm you are on the right track to financial freedom, schedule a consultation below.
FREE Report: 5 Investing Secrets Every Investor Needs to Know
Avoid making bad investment decisions. This little-known report reveals 5 better ways to invest in stocks.
What is happening with Russia, the stock market, and inflation? Is the stock market and economy still intact?
In this month’s Stock Market Update, Steve Wolff discusses what has occurred in January relating to the stock market, inflation, raising interest rates by the federal reserve, supply chain issues and much more.
FREE Report: 5 Investing Secrets Every Investor Needs to Know
Avoid making bad investment decisions, this little-known report reveals 5 better ways to invest in stocks.
Learn 5 simple steps to avoid making bad investment decisions.
DISCLAIMER:
WWM Financial is an SEC- Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where WWM Financial and its representatives are properly licensed or exempt from licensure. Investing involves risk and possible loss of principal capital. No advice may be rendered by WWM Financial unless a client service agreement is in place.
Click on the image above to watch this podcast episode.
Market Update: 7/9/2021
Transcription below:
There’s been a lot of good news in the last month. With COVID cases declining, there are more people getting vaccinated, there has been a lot of re-openings in the economy and the earnings have been good as well. This resulting in a really good time to be in the stock market. The market is still favoring rotation into the pandemic recovery plays. Those stocks that lagged last year have caught up a lot this year. It might even be slowing down just a bit, but June was a good month for that. Financials and energy continued to lead the way with tech stocks being a little bit further behind, although everything grew a little in the last month.
Let’s talk a little bit about inflation because in the middle of June, there was a pretty good-sized dip in the market. This dip was probably 5% to 7% and people got a little bit nervous because suddenly, bonds were spiking up in yields and people were getting afraid because of inflation.
It is really is funny because when the economists talk about inflation, they do ex-oil and ex-food, which means without including those. I think that’s a load of bull hockey for anybody who likes to eat and goes to the grocery store. They know that food is way more expensive than it was just a few months ago. Also, if you are not in one of those battery-operated cars and you have to go to the gas station, you know that you’re paying a lot more for fuel than you were paying before. Inflation is real in your pocketbook, even if the economists aren’t including that.
Crude oil prices are up to $75 a barrel, and that’s the highest they’ve been since 2018. In the U.S., it now costs more than an average of a dollar or two a gallon than it did just a year ago, according to GasBuddy who analyzes fuel prices. If you were paying maybe three bucks last year and you’re paying four bucks today, that’s a 33% increase. I don’t know about the economist, but I think that’s inflation in my pocket.
There’s also been a shortage of semiconductor chips, which is causing some havoc because semiconductors are in everything we have, from toasters to ovens to microwaves to computers to cars. As a matter of fact, the auto industry has really been hit the hardest because they cannot finish producing a car without computer chips. Companies like Ford, Volkswagen, Jaguar, have all had to stop production because they just don’t have enough chips in supply for those cars. Right now, demand is far outstripping the supply of computer chips. Those computer chip companies are probably happy because as soon as they have a chip, they can sell it; and generally speaking, supply and demand means they could probably raise the price a little bit. So those companies probably are doing very well.
Now, looking at the market for the first half of this year, some people might call this a Goldilocks market, and we’ve heard that many, many times in the past. I call it a duck market. Why? Because everything is ducky right now out there. You almost couldn’t ask for a better market.
Now, I think there’s going to be continuing to be bouts of volatility as we go. But if you’re looking forward a little bit, I really think that stocks are still the right place to be because the re-openings are there, for example, anybody who wants to get a job can get one. There are help wanted signs all over the country. Unfortunately, some people are still staying at home because they’re getting a little bit more money to stay at home than to work, but eventually, that’s going to run out. Those people are going to get jobs and I think employment will get back to a pretty good level. Matter of fact, I think tomorrow July 2nd, there’s an employment report coming out. My guess is that as we continue to go into the future, the job market will continue to get better.
For all of you out there who are wondering what you should do, I still think that stocks are the right place to be. I think they’re better than bonds, at the moment. If yields do spike up, bonds will go down in price. It may hurt stocks a little bit too, but that’s a ways down the road. I still think we have time to go before that ever happens.
Steve Wolff is a Managing Partner at WWM Financial in Carlsbad California.
Steve can be reached at 760-692-5190.
Disclaimer
The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
WWM Financial is a Registered Investment Advisor. Advisory services are only offered to clients or prospective clients where WWM Financial and its representatives are properly licensed or exempt from licensure. No advice may be rendered by WWM Financial unless a client service agreement is in place.
Now for the understatement of the day…volatility has returned to the stock market.
Why has the stock market gone down with such force in the last week? I think there are a few reasons.
Profit taking. Stocks had run up extremely quickly over the last year or so, especially in January when the indices were up by around 8%. So it is normal for profit taking to occur.
Rising interest rates. Some investors have been spooked by the rise in interest rates. The 10-year government bond has risen to around 2.9%. They also believe the Federal Reserve is going to raise rates 3 or 4 times this year. When interest rate on bonds get high enough, they are competition for money that is now in the stock market. So the people who worry about this decided to sell some of their stocks.
Forced Selling. Perhaps the main reason for the stock market dive has been caused by hedge funds and others who invested in something called the VelocityShares Daily Inverse VIX Short Term Exchange Traded Note (and other securities like it). It is a security that bets on the volatility of the stock market. This is a highly leveraged security that is great when there is no volatility in the market.
Unfortunately, the spike in volatility in the market has caused some of these Exchange Traded Notes (ETNs) to nosedive by as much as 80%. Because they are leveraged, the hedge funds and other investors were losing a fortune and had to cover their margin calls. How do they raise money to cover the margin? They sell stocks that they own. This is what’s known as forced selling and it is happening in spades.
Are We in A Bear Market?
Does this indicate the start of a bear market? I don’t think so because the earnings that companies just reported were pretty good. Nothing has changed with the economy in the last week, just the price of stocks.
We might be in for a few more days of this until the forced selling abates. I do not believe this is the time to do any wholesale selling because the economy is still good. The tax cuts haven’t even started to kick in yet.
The advice from us is to sit tight, stay calm and if you have the cash be ready to gobble up some good stocks that continue to be forced lower.
As always, we are here for you, so if you have any questions, do not be afraid to contact us.
You can reach us at 760-692-5190 or Steve@WWMFinancial.com
