Click on the video above to watch September's Stock Market Update.
Stock Market Update 10/6/2021
In this month’s Stock Market Update, Steve Wolff (Managing Partner) summarizes what has occurred in September. This ranges from market indices, bond yields, inflation, value vs growth stocks, the Evergrande drama and supply chain issues, government funding, etc.
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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 an SEC 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.
In this episode: Steve Wolff discusses how excided he is about the investing opportunities in this techno-digital revolution.
Full transcription below:
Steve Wolff:
Hello everyone, this is Steve Wolff with another edition of Steve’s Stock Stories. I’m here with my
cohort, producer and friend Joscelin Magaña.
Joscelin Magaña:
How’s it going everybody?
Steve Wolff:
This is one of my favorite topics. I am so happy to be alive at this point in time, because we are going
through a technological digital revolution. This must be what it felt like to be in the industrial revolution,
when you went from the horse and buggy to cars. Of course, eventually putting men on the moon. But I
mean, all the things that happened in that time are happening now only they’re happening digitally.
Joscelin Magaña:
I feel the same first feeling when I saw the world change in a dramatic way where I was so excited. Two things that I remember surfacing, the mobile phone and the internet.
Steve Wolff:
Oh, yeah.
Joscelin Magaña:
Remember when the movie The Saint came out? That little phone was amazing. He had video on there, he got text messages. I thought, “Oh my gosh, if that could ever possibly happen.” Then we have way better phones than that now, you just throw that little toy away. Right? The other big thing that I saw was the internet. When I was in college, we were just using email at the time. There were these things called websites. I remember thinking, “Wow, we’re going to be able to buy stuff on the internet
someday.” I remember telling somebody, “Hey, this is going to be an amazing space because we’re just
going to be buying stuff on the internet.” And they’re like, “Who’s going to buy stuff on the internet?
You just go to the store. Why the hell are you going to-?” Okay. One technological advanced before this, which kind of wasn’t, but everybody thought was crazy, was when everybody started buying bottled water; but that’s a whole other subject.
Steve Wolff:
Well you talk about phones. I remember watching the movie Wall Street with Michael Douglas and he
had a mobile phone, but it was probably, I don’t know, 12 inches.
Joscelin Magaña:
Oh, yeah. They were big.
Steve Wolff:
They were huge.
Joscelin Magaña:
They were big, like a shoe box.
Steve Wolff:
Right, they were big. You could make a phone call on there today, my goodness, you could do just about everything. You can turn on your car, you can-
Joscelin Magaña:
You can turn on your sprinklers in your house, you can see your front door. It’s amazing.
Steve Wolff:
What they have in that little phone is way more powerful than what IBM first came up with when they had that first computer that took up, I don’t know, three rooms or something. With vacuum tubes and whatever, it’s just incredible.
Joscelin Magaña:
I guess where I’m going with this is that I’m as excited now as I was when mobile phones were becoming more accessible and the whole mobile phone revolution and the internet. I remember my first job we didn’t even have computers on our desks…
At WWM Financial’s Q1 Brunch at The Canyons in Carlsbad, Ca.
In case you were not able to attend Brunch this is a recording of Susan Taylor of Scripps Health discussing Gadgets, Gizmos and Good Health. Click on the image directly above to listen to the recording.
Listen to Susan Taylor of Scripps Health talk about all the technological advances that they’re testing in clinical trials or have already been approved by the FDA to improve your health. A gadget can be sparkly and monitor the number of steps you take each day. It may look like it’s doing a lot of things, but we Scripps won’t use it unless they see results that confirm these gadgets and gizmos actually improve your health. Susan discusses a multitude of devices that are being used for diabetes, cancer, heart disease and sleep. Some of this technology is implanted in the body. The patient never feels it, but it allows doctors to monitor patients no matter where they are anywhere in the world. The intent of this of technology is to promote better health, and help people live longer, healthier and more productive lives, at a lower cost. Some of this technology is in fact, life-saving.
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
