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All tagged stocks
Last week we officially hit bear market territory for the S&P500, the widely used barometer of US stock market prices. As of the writing of this article, the market is down ~22% on the year. We all want to know how bad this will be. Is there anything we can learn from previous bear markets that might help?
In the last few years almost 200 specialized 'thematic' ETFs and mutual funds have been created. The asset growth of thematic funds quadrupled. Thematic funds offer unique, tactical bets on investment opportunities grouped by a subject or motif. Typically, it’s about technology and our changing future. Thematic funds tend to be a bull market phenomenon, possibly a result of investor overconfidence and enthusiasm. (There’s a good line that bull markets make everyone look smart.) It’s an intuitive strategy: “Let’s invest in a handful of really smart innovative companies that people are excited about, the growth potential is incredible.”
I'm getting a lot of 'what do you think about the market right now?' questions from clients, friends, and neighbors. CNN’s ‘fear index’ says we are all in extreme fear. I don’t know about that, but maybe it's time to reflect.
If you checked your 401k statement for the last quarter, you lost money. (If you didn’t, I want to invest with you!) Even your usually boring and reliable bonds are down a lot. Bonds, broadly, are down more in the last three months than any same period since 1980. Worse, they are going down at the same time stocks are going down, another rare occurrence. Since last September the entire US bond market is down more than the entire US stock market by 5 percent!
You are no doubt familiar with the group of mostly anonymous investors who last year coordinated the leveraged buying of GameStop, AMC, and other stock options, pushing up the price to the point that some hedge funds lost a lot of money. It was a good David and Goliath story and a new development in consumer investing. When I placed my first and only stock trade for GameStop in January of 2021, it was not with the idea that I believed in the stock. I simply wanted to see what it was like to buy into a frenzy. (I’ll cut to the chase; it was terrifying.)
The other week, a client called me from Mexico on her new vanlife journey around North America. She has modest assets and is trying to define herself less by her job, which she is doing part-time remotely. I’m proudly responsible for the financial plan supporting her life goal. I mentioned to her that the US stock markets were down over 11%. “Oh yeah, look at that,” she said, reviewing her online statements, with interest but not worry. If, like her, you were living your best life last month and not paying attention to the stock market, kudos. It’s not good for investor health or wealth to pay close attention to stock market returns.
