Feliciano Financial Blueprint™ Consultation
Schedule your FREE consultation with a Certified Financial Planner™ today!
Use this form or call us directly at:
(903) 533-8585
In mid-to-late January, investors experienced one of those common but utterly nerve-wracking pullbacks in the stock market. An accumulation of factors — inflationary pressure, potential adjustments to monetary policy, geopolitical concerns — combined to put the stock market into a tailspin.1 If there is one reminder that might provide investors comfort, it’s that none of this was wholly unexpected and that a periodic market reset can often lead to stronger performance.
It’s important to remember that the reason a buy-and-hold long-term strategy generally works is because it is based on stock-picking fundamentals, customized asset allocation and meeting specific goals. A person whose objective is to make “X” amount of money in less than a year makes them more of a trader than investor. We help our clients meet specific financial goals, so we adopt and encourage a long-term outlook. These periodic market setbacks are not that concerning and can often position a portfolio for higher growth in the future. We would worry more if one stock were faltering due to fundamental issues, but a whole sector or asset category is indicative of other factors that we, as investors and advisors, cannot control. All we can do is wait it out. With that said, if you’re struggling with today’s market volatility and would like to position your assets for better security, we’re happy to discuss ideas with you.
A brief roundup of large institutional wealth managers reinforces this “keep calm and carry on” investment perspective. For example, Merrill Lynch’s January Capital Market Outlook observed that despite the early-year headwinds, “2022 remains strong on the back of continued economic reopening, solid growth projections and robust corporate earnings.”2
Invesco believes that the gradual deceleration of growth by Fed policies will help curb rising inflation this year. It also states that while the omicron variant is negatively affecting growth in the first quarter of 2022, its analysts believe that declines will be more than made up for — as possibly as early as the second quarter.3
Goldman Sachs’ CEO, David Solomon, recently talked about how new monetary and fiscal policy actions in response to the pandemic have somewhat altered the market landscape from how it might have responded to previous setbacks. In fact, he notes that in recent years, the environment of sustained low interest rates and “free money” have caused investors to forget the effects of those factors on asset prices.4
Amid the recent sell-off in tech stocks, BlackRock retains a positive outlook — even for the sector. “This year’s stock sell-off hides huge shifts under the hood, with tech shares falling and many cyclicals eking out gains. … Indeed, we believe fading omicron fears have contributed to the tech sell-off. We favor a barbell approach in our sector views. We like cyclicals as the powerful restart rolls on, and beyond a tactical horizon, we still favor solid tech and health care stocks because we see them as beneficiaries of structural trends like digitalization and the transition to a net-zero world.”5
1 Ed Moya. MarketPulse. Jan. 21, 2022. “US Close: Market jitters ahead of Fed and massive earnings week, Netflix tanks.” https://www.marketpulse.com/20220121/us-close-market-jitters-ahead-fed-massive-earnings-week-netflix-tanks/. Accessed Jan. 24, 2022.
2 Merrill Lynch. Jan. 18, 2022. “Capital Market Outlook.” https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/CMO_1-18-22_Merrill.pdf. Accessed Jan. 24, 2022.
3 Kristina Hooper. Invesco. Jan. 18, 2022. “Have Omicron and the Fed changed our 2022 outlook?” https://www.invesco.com/us/en/insights/have-omicron-fed-changed-our-2022-outlook.html?twclid=11485705826467778562. Accessed Jan. 24, 2022.
4 David Solomon. Goldman Sachs. Jan. 18, 2022. “David Solomon on the Firm’s Performance, the Global Economy and What to Expect in 2022.” https://www.goldmansachs.com/insights/podcasts/episodes/01-18-2022-david-solomon-f/transcript.pdf. Accessed Jan. 24, 2022.
5 BlackRock. Jan. 24, 2022. “Weekly Commentary.” https://www.blackrock.com/corporate/literature/market-commentary/weekly-investment-commentary-en-us-20220124-trimming-our-treasury-underweight.pdf. Accessed Jan. 24, 202