The economy is going through a pivotal moment as the Federal Reserve withdrawals stimulus as economic tailwinds may be in jeopardy. The culmination of inflation, supply chain constraints, pandemic backdrop, rising rates, and easy money policies coming to an end has led to some individual stocks losing 30%-80% of their value in a matter of weeks. All the major indices have sold off in a meaningful way and are now in correction territory. Initially, there was a massive sea change in the market out of technology, specifically high beta/richly valued stocks and into value. As a result, the Nasdaq dropped over 15%, Russell 2000 dropped over 20%, S&P 500 dropped over 10%, and the Dow Jones dipped down over 8%.
With many high-quality companies selling at deep discounts, this correction offers an opportunity to build out a portfolio and engage in dollar-cost averaging. It's difficult, if not at all impossible, to time the market and buy at the exact bottom. However, one can initiate a position and add to the position as the stock becomes cheaper when and if the market-wide sell-off deepens. Any portfolio strategy should include a cash portion, and it's times like these where the cash portion should be deployed and put to work.
Earnings Disasters And Indiscriminate Selling
Disappointing earnings have been a linchpin for individual stocks to lose swaths of value while sending entire sectors into a downward spiral. The financials suffered massive selling pressure after JP Morgan (JPM) and Goldman Sachs (GS) reported earnings. Netflix (NFLX) saw its stock tank over 25% after reporting earnings, and this reverberated through the streaming space to sink Disney (DIS) too. Continue reading "Opportunities Abound - Building Out A Portfolio" →
