Tag: Stock Market

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%.

Continue reading “2023 So Far So Good…”

Be on Lookout for Small Caps

A short and punchy note today. Recent data speaks to money flows and trends favorable to small company stocks. 

Taking a step back, at most basic, small companies (when successful) become large companies – a good thing. Also, small company stocks are bought much cheaper (lower ratios of price to book value) in the marketplace. The caveat is that small companies typically have less of a track record and can be more volatile.

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Review: What Could Happen in 2023

Since it is approaching mid-year, it makes sense to look at a few data points from the start of 2023. Back in January, TGIF 2 Minutes took a look at two charts:

  1. How much more expensive growth stocks were (and are) versus value stocks (top chart)
  2. Average US stock returns following big downturns in markets (bottom chart)

Read on for the review from earlier in the year, followed by a June 2023 update. Continue reading “Review: What Could Happen in 2023”

Warren Buffett Wisdom 2023

Warren Buffett, the world’s 4th or 5th richest person, famously writes a Letter to Shareholders each year published around the end of February and featured in May at his annual meeting for shareholders on a farm in Omaha, Nebraska. His company, Berkshire Hathaway, has an amazing long-term record of rewarding long-term shareholders. Buffett is now 92½ years old and nearing his 60th annual go-around with the meeting and shareholder letter.

The letter has a mild cult following and is read by seasoned, experienced investors; younger, newer investors; company CEOs; and anyone who has a few extra minutes for down-to-earth reflections from a billionaire. This year’s letter was far shorter than past years – and thus to the point. Here are a few of the highlights:

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What Could Happen in 2023

What is in store for 2023? Is the stock market overvalued? In answer to the second question: perhaps yes, perhaps no. When most people ask, “Is the market overvalued or undervalued?” what they really are asking is, “Where is the market going next?”

Of course, no one knows for sure. But a bit of historical data can offer information for comparison. Below (top) is a chart showing how over-priced US growth stocks (yellow-ish line) have been over 100 years and how over-priced US value stocks (greenish-blue line) have been over the same period. It would seem that growth stocks are still over-valued. But look at the period for growth stocks between 1974 (the last time inflation was as high as it is today) and 1998. Can you say that it was obvious in 1992 that growth stocks were overvalued? Probably not.

Fast forward to 2023. What could happen next? See the bottom chart for more data.

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Reality Bites

Today’s TGIF 2 Minutes was delayed to reflect a speech given earlier today in Jackson Hole, WY by US Federal Reserve Chair, Jerome Powell.

Earlier today (Friday) US Federal Reserve Chairman Jerome Powell spoke in a widely anticipated speech at an annual meeting of the Kansas City Federal Reserve Bank. The market and investing worlds were looking for guidance from the Fed Chair regarding interest rates and future inflation. Part of the reason for the speech being so closely watched goes back to a former Fed Chair. For those old enough to remember, in December 1996 Alan Greenspan made a now famous speech that rocked the markets when he coined the term, “irrational exuberance.” Then Fed Chairman Greenspan commented,

  • “How do we know when irrational exuberance has unduly escalated asset values…?” Greenspan went on, “We should not underestimate or become complacent about the complexity of the interactions of asset markets and the economy.”*

And down the markets went for a time. 

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Financial Satisfaction in Crazy Times

These are crazy times, almost chaotic. Chaos is defined as complete disorder and confusion – and parts of the world and our lives may be nearing that point, or at least feel that way. How does an investor get financial satisfaction in times like these? Carefully and patiently.

“Carefully” can equate to:

  • having a plan that addresses saving, spending, taxes, & investments
  • being able to monitor and adjust the plan, perhaps with an adviser
  • then continually executing the plan.

The “patiently” part can be more difficult and is just as critical.

Storms are temporary and the worst of chaos and volatility will pass – be prepared for an unknown timeframe.

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War, Invasion & Investing

Clearly, war and invasions have far more repercussions than merely financial. But somewhat luckily, the financial toll in most cases, for us as Americans (exception September 11th), has been what hits closest to home. And unluckily financially speaking, the biggest savers and investors are then most affected by the financial toll of war and invasions around the world.

Currently, the world – most notably the Ukraine, Eastern Europe and Russia – is experiencing the effects of an invasion that (God help us) may or may not turn into a larger situation. Specifically, the financial effects of the Ukraine invasion by Russia are being felt far beyond Europe and Russia. US and worldwide stock markets are down both from late 2021 highs and most notably in late February.

World events over the past 50+ years, and the accompanying market reactions that took place over the short-term and longer-term.

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The Greatest Chart Ever

In times of stock market weakness, similar to year-to-date in 2022, it is human to experience fear. Part of staying on course with a savings and investment plan takes into consideration that fear is part of life.

Most recently, a number of investors may be expecting – and would be wise to expect – a market pullback due to more than a decade of steady market gains. However, this realization does not necessarily lessen or eliminate fear. Here is where the “Greatest Chart Ever” offers needed perspective.* Over a period of more than 40 years of intra-year stock market performance, the chart illustrates valid reasons NOT to allow short-term market moves (monthly, quarterly – even yearly) to lead to poor investment decisions. Why? Please read on.

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Markets Prefer Certainty

Amidst the continuous stream of news and recent market fluctuations, a dash of certainty was injected into stocks and bonds with this week’s Federal Reserve meeting. If only for a day.

Several factors are at work –

  • interest rates, per the US Fed
  • future government spending policy
  • rates of employment
  • market valuations

among other factors.

A dash of certainty was injected into stocks and bonds with this week’s Federal Reserve meeting. If only for a day.

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