2022 Volatility: Week 4
Overview
Selloffs like the ones we are currently experiencing are never fun and enjoyable. These are very normal feelings. The main source of the volatility in market is the Federal Reserve and the prospect of tighter monetary policy. Fortunately, there are several recent historical periods we can look at that may provide a clue as to what’s in store for this year.
Periods from 2011-12, 2015-16, and 2018 were all periods when the Fed was slowing its asset purchases or reducing its balance sheet. The consistent theme in all of these periods is corrective or sloppy and choppy trading. The current selloff continues to resemble the time period of first half 2010 and first half 2018 in particular. Almost weekly we have messaged this in our client and prospect contacts, with the goal of helping everyone to remain calm in the face of volatility.
What time is it?
As we’ve mentioned, it is not time to panic. But it is time to start to shift away from a “buy the dip” mindset, where each dip is just a couple of days long, and then stocks starting rising straight up again. We think those days are behind us, for now.
Going forward, we think the “dips” look more like “corrections,” and that they last longer (via that sideways, choppy, sloppy price action) than they did in 2020 or 2021. This is the kind of market where investors may have to grit their teeth for a while, as the market whipsaws around in both directions, for quarters at a time. But, in spite of all that, as a reminder, we do believe that the volatility this year will yield to positive stock market performance before the end of the year. The road there is just likely to continue to be bumpy.
As a review, our first half 2022 outlook, released on December 3rd under the title “Curb Your Enthusiasm Yields to a Bull Market Buy” can be found in video format just below.
Last Week
Friday’s big rebound helped the S&P 500 advance .8% on the week to end a string of three weekly declines. Yes, the overall market was up last week.
Year to date losses in the S&P500 now stand at -7.0% , or -7.6% from its All-Time-Highs. The tech-heavy NASDAQ managed to break even last week, limiting its YTD slide to -12.0% and correction to -14.2%.
Oil and Economic Data
Oil prices are near seven-year highs at $87.3 (WTI), with OPEC+ nations meeting on Wednesday. Natural gas prices are testing the $5 mark with 1) the Northeastern blizzard last weekend and 2) tense Russia/Ukraine situation adding volatility there.
As we expected, the short-term economic data is missing estimates. Two ISM measures are likely to miss due to Omicron, worker shortages, and supply bottlenecks, though remain in expansion territory.
Meantime, new motor vehicle sales are expected to reverse higher in January following consecutive declines, while remaining at low levels due to microchip shortages.
The economy grew 6.9% in Q4, rounding out the strongest year of growth since 1984. However, inventories accounted for over half the growth.
Oak Harvest will continue to keep you informed on our views of the economy and the markets, and we encourage everyone to read these weekly updates, and check out our weekly video releases:
Oak Harvest YouTube Channel
https://www.youtube.com/channel/UCkLvOm9F5iC01-hHxRmUXpQ
Stock Talk Podcast (Weekly Market News and Opinion from Oak Harvest):
https://oakharvestfg.com/stock-talk-podcast/
The Investor Mindset Podcast (Introduction to Critical Concepts for Investors):
https://oakharvestfg.com/investor-mindset/
First Half 2022 Outlook – Curb Your Enthusiasm Yield a Bull Market Buy.
https://www.youtube.com/watch?v=Ybk6bjjkILQ
This content contains general information and express the views of Oak Harvest Investment Services. All data, articles, and information cited are believed to be reliable at the time of creation; however, Oak Harvest does not warrant any information contained herein to be correct, complete, accurate or timely.
Oak Harvest provides links to content produced by other websites that OHFG does not control, and Oak Harvest does not necessarily approve or endorse such content and does not guarantee its accuracy. Nothing in this content constitutes personalized investment advice. Any charts, indicators, or graphs included or referenced in this content have limitations, and no such material is able, in and of itself, to provide a buy or sell recommendation for any security. Strategies and ideas discussed may not be right for you, and views and opinions expressed may change without notice. Strategies and ideas discussed will not apply to all client accounts or portfolios.
Nothing in this content constitutes a recommendation, or an offer or solicitation to buy or sell securities. Oak Harvest makes no assurance as to the accuracy of any forecast or projection made. Not all past forecasts or projections have been accurate. No current or future forecasts and projections are guaranteed to be accurate. And future forecasts may not be as accurate as any forecasts discussed. Indexes like the S&P 500 are not available for direct investment and your results will differ. Past performance is not indicative of future results. Investing involves the risk of loss.
