Tag: Asset Allocation

Spooktacular Investing Times

It is Halloween, so with an intended pun it must be said: spooktacular times in markets and the economy continue. 

AI (Artificial Intelligence) is simultaneously spooky and spectacular. Nvidia, this week, reached a new milestone surpassing all other US companies with a $5 trillion market valuation. Nvidia’s market cap is now larger than the largest semiconductor companies AMD, Arm Holdings, ASML, Broadcom, Intel, Lam Research, Micron Technology, Qualcomm and Taiwan Semiconductor Manufacturing combined.*

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Refreshing Perspective

Please see the simple graphics and detail above for reasons why a globally diversified portfolio has outperformed despite recent (and in several cases, major) declines in the “Magnificent 7”. The article sites three charts. TGIF 2 Minutes chose two of the three.

In addition to these data points, there are still more reasons to keep faith in a well-laid out long-term strategy that takes into account more than solely the large growth area of the stock market.

This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.

Rocky (But Good) Start to the Year… PS. “Alts”

This may be the last weekend we can say, “Happy New Year!” to friends. And a fairly happy new year it has been for the markets… with a few bumps here and there. The “bump” was a mini-cavernous plunge for shares of Nvidia shares, down 15% in one day without a rebound. Both the S&P 500 and Nasdaq 100 (tech focused index) promptly rebounded.

However, there may have been a few investors, especially those newer to the markets or those less patient among us, who need a “gut check” when markets get rocky. Here are a handful of questions investors can ask themselves, in order to stay put with current investments in down and seriously down markets – providing a plan is already in place:

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One New Year’s Resolution

It is that time of year when goals of every sort are made – for work, family, health and, yes, personal finances. Thinking about and writing down goals for each of these areas can be productive in itself. But then getting practical and boiling down a list of goals into a handful of things – or even JUST ONE THING – that a person resolves to make happen is critical.

Of course, this task is not easy, but hey, it is January 10th. Let’s give it a go.

Here is a goal that could be either a lifetime goal, or a one- or two-year goal that could make a lifetime of difference:

Focus on Saving in order to maintain Patience – in the event of the inevitable market decline. My nickname for this goal is FSP.

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The Election/Markets Waiting Game

This week in a conversation with one of my favorite people, I discovered – or confirmed – something that was already obvious: the US Presidential election has nearly everyone on edge. There are varying degrees of “on edge” including,

  • overwhelmed
  • nervous
  • confused
  • curious
  • angry
  • discouraged
  • (fill in the blank).

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Checklist for Down Markets

How did it feel in both 2015 and 2016 when for the entire month of January, the stock markets (the S&P 500) started the year DOWN 3.1% and down 5.1%, respectively? Isn’t January supposed to be an UP month? It did not feel great then and it doesn’t feel great at any time in the year.

The following is a worthwhile commentary and check list (from a 2014 edition of TGIF 2 Minutes) that can serve as a “gut check” for investing when markets experience months or longer periods of meaningful declines. Even if you have read these before, consider reviewing again for perspective and direction.

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Beyond the Magnificent Seven

It’s summer and it’s HOT. Today’s will be a short and sweet edition of TGIF 2 Minutes.

The title for today was almost simply, “Beyond the Magnificent”. But a quick note on the “Magnificent Seven“ is in order.

The seven companies are, of course, Amazon, Apple, Meta (Facebook), Microsoft, Nvidia, and Tesla. This week – and the past several weeks – have seen volatility and shifts of short-term leadership in the stock markets from the Magnificent Seven growth companies to smaller and more value-oriented ones.

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Summer and Stock Markets

Upon the unofficial start to summer and the Memorial Day holiday earlier this week, the phrase, “Sell in May and go away… but remember to come back in November” may be a historically uttered phrase. Perhaps the phrase had slightly more significance before super-diversified mutual funds, ETFs and indexes entered the picture, but there are still believers in the concept.

More pronounced are data combining the old “sell in May” theory with the 3rd year of a US Presidential cycle.* Although last year’s late year 2023 gains – so far – cannot touch the strength of 2024 which is the 4th year of a US Presidential cycle.

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Lack of Clarity = Volatility

Markets prefer certainty. In times of relative economic certainty, market trends can be more defined and steadier. In times of economic uncertainty, markets react with volatility similar to the past 6 to 7 months. Two simple pieces of data:

  • The 10-year US Treasury yield was as high as 5.0% in late-October, then as low as 3.79% just after Christmas, then back up to 4.28% in March and very recently higher to 4.68% a mere few days ago. These levels – and the speed with which they have changed – represent fairly massive volatility based on historical 10-year US Treasury rates.
  • In the US stock markets, there has been similar volatility in both small-company indexes and the larger-company S&P 500 since last year with a noticeably weak 3Q 2023 and then all-time highs taking place just this past April 2024.

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2023 So Far So Good…

Superstition is not a strategy, although elite, professional athletes subscribe to superstitions all the time*. The reason for bringing up the topic is that talking about the stock market’s positive performance year-to-date in 2023 could warrant dialing back the optimism – for superstitious reasons! Hence, the “…” in the title “So Far So Good…”.

This said, the US stock market just finished a strong 2-month set of returns, in addition to an excellent January and stable returns in between. This positive performance has no guarantee of continuing but is evidence that staying in the stock market for the long-term – with a plan – can have positive long-term consequences.

  • The S&P 500 is up 16.4% year-to-date.
  • The Nasdaq over the same period is up over 31%.
  • The Russell 2000 Index of small companies is up 9.2%.
  • The Dow Jones is up 6.1%.

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