Marc Cuniberti January 24th and 25th start hard down only to end up relatively flat at the end of the day. That said, one day does not make a halt to the event. Or should we say two days?
Most all indexes have been brutalized in January 2022.
The Dow was down 8% off its high when I penned this article. The Nasdaq is down 15%, the S&P is down 10%, and the Russell Small cap is a whopping 19%. Investor accounts may be down more or less than those figures depending on what stocks they held.
Some individual stocks that were popular during 2021 were down 50%, 60%, 70%, or even 80% by January of this year. Take a look at the stay-at-home darling ZOOM (Symbol- ZM). Obliterated at down 74%. Like other notable stocks, it started its crash much earlier.
In fact, its erosion first lowered its ugly head in OCTOBER of 2020. Indeed, many popular stay-at-home stocks started their descent in late 2020 or early 2021.
It is why the indexes may not tell the whole story of what was occurring in the overall market. Investors may be scratching their heads wondering why their 2021 balances may have lagged upward movement compared to what they saw on the evening news.
Why this all happened has been covered in previous articles and radio programs, including but not limited to supply-side shortages, the Omicron variant and the response to it, inflation, and the Feds threatening to raise interest rates. Top that off with the run-up of some stocks whose valuations went into the realm of the ridiculous and we had the makings of an accident waiting to happen and it did.
The fact that January 2022 brought investor pain is normally not a good sign for the rest of the year.
It is said how January goes, so goes the year. It’s called the January barometer. Not written in stone mind you, as no one can predict market movements at any time, but the saying does have some precedent. 20 of the last 24 years the January effect has been an indication of the performance for the rest of that year.
During times of market crashes, an investor’s universe can be quite unpleasant. I have written about how bad it can feel before. Let’s just say losing sleep, anxiety, overeating or not eating, thoughts of losing it all, and more run the gamut of pain felt when savings evaporate in a market crash.
When “recovery-green” is finally seen on the screen, however, the relief can feel like newfound love.
Investors must be careful during and following crashes. Head fakes are common as are dead cat bounces, meaning what looks like a recovery might just be a blip in an otherwise avalanche yet to continue.
After market explosions, don’t be too hasty to get back in. This is a time to be prudent and patient. Although many investors don’t ever sell, I am of the opinion it’s better to miss a top than take a ride to the bottom.
After all, who’s to say how far and how long a crash will go or how bad it could be?
Certainly not me or anyone else for that matter. And at least when you opt to “opt-out”, you can sleep a bit better knowing you made at least some decision and won’t ride the train off the proverbial cliff to the poor house.
When you do sell some or all of your positions, however, the buy-and-hold crowd will usually chime in and remind you the market always comes back.
Certainly looking at a chart of the markets over long periods of time, no one could say that assumption is wrong.
But the fact remains no one can know for sure if it will always come back, hence the disclaimer “past performance is no guarantee of future results”.
After all, if we knew it would always come back, why would we fret, right? But we still do.
The fact is, and it IS a fact, no one can say the market will always come back.
In fact, someday, it won’t. Whether it be from the end of mankind or an implosion of the U.S. dollar or economy that wipes the slate clean, it COULD happen.
The chances are slim for sure, but they are not zero. And if that does occur, losing it all or most of it, is not an option, at least in my house.
I never know just which crash will be “THE CRASH” and neither does anyone else. Call me crazy or call me overly careful.
Whatever.
All I know is I don’t know, and neither does anyone else.
For now, we keep our eyes fixed in the spring of 2022, and see what unfolds.
Be careful out there.
‘Watching the markets so you don’t have to”.
This article is opinion only of Marc Cuniberti, may not represent those of this news media, and should not be construed as investment advice nor represents the opinion of any bank, investment, or advisory firm. Neither Money Management Radio (“Money Matters”) nor Bay Area Process receive, control, access, or monitor client funds, accounts, or portfolios. Contact: (530)559-1214 or news@moneymanagementradio
