2022 - Turn Down the Noise!
The VINE is BACK!
The 24 / 7 news cycle is having a great year in 2022! Fear raising prognostications and anxiety causing financial market adjectives are endlessly opined with the conviction of a 7-year-old not wanting a bath.
Inflation, correction, rates rising, tech dropping, Omicron cases rising, global growth stopping, crypto, Metaverse, Web 3, Biden’s plans are great / Biden's plans are horrible, Peloton’s stock is spinning out of control (see what I did there?) …..the themes deemed newsworthy are endless! Remember the news tells us “What’s just happened” – with no factual insights or clues about “what’s going to happen”!
Already this year, I have received at least a dozen “2022 Market Forecasts” –pages of beautiful charts and exhaustingly thought-out positions on what will happen in 2022 and more astoundingly “why” and in some cases “when” it will happen. During my seemingly endless string of writing classes appearing on my high school and college class schedules, I honed my Creative Writing, Expository Writing and Business Report Writing skills among others writing styles. The only class I failed to take was the one teaching the “ability to write factually and convincingly about the exact sequence of future events”. This no doubt college senior or grad school level class likely appeared in the course catalogue as “BS 495 - Financial Market and Economy Forecast Writing” …with the emphasis on the course letters and number (495 goes in a continuous circle!)
Seriously, most of the following "insights" have been found in the endless string of 12–15-page market forecasts that have flooded my inbox:
- Volatility will remain high! (No kidding!)
- Interest Rates may increase between 2 and 4 times in 2022! (Wow that’s going out on a limb)
- Inflation will be persistent!
- Supply Chain issues will eventually be resolved!
- Investors should be prepared for some high-flying tech stocks (which may be overvalued) to experience some price pullbacks! (See Volatility comment)
- Covid / Omicron cases will spike causing pressure on consumer spending during Q1 but should subside heading into spring fueling yet another reopening spike in economic activity. (Hotel and airline reservationists are standing by)
- The Boston Red Sox will bolster their pitching staff and advance to the 2022 World Series! (Just seeing if anyone has read this far)
- Companies with strong balance sheets, good fundamentals and dominant market position will outperform. (Over time this has proven to be the case - well - forever)
- Crypto & Blockchain will remain one of the most confusing yet interesting asset classes to follow yet I will not encourage participation! (OK no one wrote this but that continues to be my position)
On the Crypto front – I have had several suggest to me that they were going to “read up on it as this may be one of the greatest waves for future wealth building”. During the past month the per coin price of a Bitcoin has dropped from approximately $51,000+ to roughly $34,000 - $35,000 (ironically where the price was about 6 months ago). I am not sure where one goes to read a solid report about an asset class whose price fluctuates so wildly but I’d bet it was written by an award-winning Honor Student from class “BS 495”!
In summary, the equity markets have gotten off to a rocky start in 2022. There is no logical reason why stock prices do what they do over the short run. Easiest explanation is “more sellers than buyers” – seriously that’s ultimately what it is. I urge folks to remember how they felt in April of 2020 when the markets and portfolio values had dropped considerably.....looking at January 2022 markets thru that lens - "things" feel pretty good right about now.
Over my nearly 3 decades in this business, one fact remains constant: Turning off the noise sticking with a thoughtful allocation plan builds significantly more long-term wealth than emotionally selling stocks into a what feels like a depressed market and trying to determine the “best time to get back in”!
Discipline and patience!
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P.S. - What do I really think will happen this year (but have no actual idea).. although enduring several rounds of volatility driven investor anxiety US Large Cap stocks will return roughly 8% including dividends, the US bond market will tread water, portfolios guided by a commitment to a long-term plan will outperform those driven by emotion and the Sox won’t add the necessary pitching and finish Second in the AL East – once the MLB strike is over that is.