Potential Market Inflection Point Imminent?

Cautiously Optimistic

Commodity prices are soaring, the war between Russia and Ukraine is worsening, inflation is raging, and the Federal Reserve has begun increasing rates. The backdrop seems ominous; however, the market may be just one positive headline away from an inflection point to turn the tide in a positive direction.

Timing the market has been proven time and time again to be nearly impossible; however, what is possible is capitalizing during these correction periods and buying heavily discounted stocks. These correction periods are great opportunities for long-term investors via dollar cost averaging throughout these long stretches of suppressed conditions. As the best market days typically follow the worst market days, building stock positions and riding out the volatility has proven advantageous. Missing out on just a few of the best-performing days of the market in any given year can drastically alter investor returns and yield dramatically inferior results.

The Russian/Ukraine War

Conditions between Russia and Ukraine continue to worsen while the west slaps sanction after sanction on Russia for its aggression. However, per Bank of America, stock declines related to the conflict may have bottomed. Continue reading "Potential Market Inflection Point Imminent?"

Geopolitics - Sell The Rumor, Buy The News?

Relentless Selling

The old adage is buying the rumor and selling on the news; however, during this recent market correction, it's been the opposite. Selling the rumor and buying the news has prevailed when it comes to interest rate hikes and the geopolitical tensions between Russia and Ukraine. In both cases, the anticipation of rate hikes has sent the market into a downward tailspin despite the fact the Federal Reserve hasn't put forth any rate hikes. In addition, the anticipation of the Russian/Ukraine conflict boiling over into an invasion by Russia drove the markets further into correction territory.

As a result, the markets entered deep into correction territory. Over a third of the Nasdaq 100 stocks traded off at least 30% or more from their highs, over half of the S&P 500 fell 15% or more while the median biotech stock had sold off by 60% or more. In addition, massive amounts of market capitalization have been eviscerated across the board, with many individual stocks selling off 50% or more throughout this downward spiral.

Per Tom Lee, many factors, including the market's big reversal at the onset of Russia's invasion of Ukraine, indicate the markets are now bottoming around these levels. Lee stated that the market's stunning comeback in stocks and a reversal in the Cboe Volatility Index signal that the pain in the market could be coming to an end. The market had a "buy the invasion" moment, Lee said in a note. The S&P 500 opened down more than 2.6% on the invasion news, and oil prices surged above $100 per barrel. However, markets typically sell off into the buildup of geopolitical escalations but rally on the day of the invasion. Continue reading "Geopolitics - Sell The Rumor, Buy The News?"