Marc Cuniberti The question on every investor’s mind: Is the January stock market rout over?
A difficult question to answer, there are a variety of reasons for both sides of the argument.
On the side of the bulls who say January is in the rearview mirror and only sunny days lay ahead for the markets, the reasons include a decrease in CoVid cases as the Omicron variant seems to have done its job by spreading fast, being a milder version and providing a faster herd immunity benefit. Easy money from the Fed over the past two years may continue to juice the markets while the reopening trade continues to gather steam as consumers tire of being at home and are apparently spending and traveling like crazy. Comparative earnings reports that looked back on the lean months of the shutdowns now show the consumer is alive and well and apparently loaded with cash. A less contentious political environment compared to the Trump years, and a new year to look forward to. The not-so-fast bear market fans who fear more crash helmets will be needed in 2022 point to the January barometer which states as goes January in the markets, so goes the rest of the year. Inflation is rampant and that will stress out consumer pocketbooks, while also making the FEDS cut back on bailout packages and their current greasing of the financial wheels through Quantitative Easing.
LINK HERE: (https://www.businessinsider.com/quantitative-easing#:~:text=Quantitative%20Easing%20(QE)%20is%20a,and%20results%20in%20economic%20growth. )
Adding to the bear’s argument the market is headed for more trouble is Russian saber-rattling, the threat of another CoVid variant uprising, and massive supply-side shortages.
I have to admit, both sides present a believable argument.
I don’t lean one way or the other. A rare position for this analyst. Not that I don’t think inflation is serious. It is. Nor do I deny FED money will find its way into the markets, as FED money always does. After all, many argue Wall Street runs Constitution Avenue and its inhabitants. I agree.
But there are indeed many currents and cross-currents at work here. In fact, I can only remember a few times over my 50 years of being in the markets where so much was happening to so many. CoVid for sure is the real deal. Not so much as to its lethality, although it does possess that deadly quality, it is a far cry from what the Black Plaque did in the middle ages where no vaccines existed and medical care was akin to witch doctory.
I can say we did have a healthy correction in the Nasdaq technology stocks, a minor correction in the Dow, Russell, and S&P markets, and global equities also suffered. Not to say it can’t go lower. It can, but having a correction in the rearview mirror is better than having an irrationally exuberant market that has plowed ever higher with no correction. Corrections, when they end, can lead to rallies, and rallies can lead to recovered losses and stock market gains. Something all investors wish for.
Since I don’t know which way markets will go for sure, and no one else does either, its best to tread carefully, invest slowly but steadily, has protection stops in place which are predetermined sell points on some or all your securities, and don’t believe everything the buy and hold crowd tells you.
And never forget famous investor Warren Buffett’s two basic rules:
Rule #1: Never lose money.
Rule #2: Don’t forget rule one.
In conclusion, although investor portfolios may have suffered severe setbacks in a rather brutal start to 2022, at some point the market may begin again its journey into the stratosphere in a grand melt-up from an inflationary inferno, a term I will certainly explain in the next Money Matters.
“Watching the markets so you don’t have to”
No one can predict market movements at any time. This is not a recommendation to buy or sell any securities. This article expresses the opinion of Marc Cuniberti and may not reflect the opinions of this news media, its staff, members or underwriters, nor any bank, brokerage firm or RIA and is not meant as investment advice. Mr. Cuniberti holds a degree in Economics with honors, 1979, from SDSU. His phone number is (530)559 -1214.
