Last week we wrote:
The final week of trading after Christmas usually brings out the bulls on Wall Street. Depending on who you listen to, what’s known as a ‘Santa Claus Rally’ can occur either the week before Christmas or the week following. Well, now we know that Santa did not set foot onto the New York Stock Exchange’s trading floor this past week and it remains to be seen if he makes an appearance this upcoming week. We’re thinking not but if he does, he won’t stay long!
The numbers speak for themselves
To say that 2022 was challenging for investors would be a bit of an understatement. The markets experienced the worst year since the financial collapse of 2008 and a few indexes saw their worst year since 2001.
The Dow Jones, the oft-quoted index of 30 companies, fell 8.8 %. The S&P 500, a much better gauge of the market due to it’s being comprised of 500 of the largest publicly traded companies in the US, was down 19.4 %. The S&P Mid-Cap 400 index fell 14.4 %. The Russell 2000 index which tracks the performance of the smallest publicly traded companies was down 21.6 % and the NASDAQ Composite, the tech-based index, was down 33.1 %
Building your wealth with wisdom
When GaneWisdom/Market Edge began publishing in the summer 2022, the markets had been in turmoil for months. I was consistently asked my advice as to ‘what to do’ based on my 30+ years of experience as a stockbroker and as a Registered Investment Advisor. Although I had been away from the market analysis that had created my success during those many years, for a while (refer to my bio in Gane Wisdom.com), I was, and am, very familiar with the indicators that went into making sound financial decisions based on market conditions. I was encouraged to offer these insights once again. My objective now consists in helping others to manage their investments on their own through our subscription service. This is especially helpful for those who rarely (if ever) hear from a financial advisor, although many financial advisors follow our analysis as well. I will let you judge how effective those insights were after reading our past posts found within this website.
For now, however, let’s see where things stand.
What you can expect soon
Within the next few weeks, those of you who are currently enrolled in a 401k, 403b, IRA, Roth IRA and most retirement accounts will be receiving your quarterly statement for the period 9/30/22 – 12/30/22. If you were invested in large companies, S&P 500-type companies, you will see an increase of somewhere around 5 ½ % in this quarterly statement. Within a short time after this paperwork arrives, you will then receive your year-end statement. This will likely be painful to view as illustrated above. The good news however is that as you continue to deposit money into your retirement account on a consistent basis you are evening out the price of the funds which you’re investing into. This is called “Dollar Cost Averaging”. Many advisors suggest a ‘Buy and Hold’ strategy due to the market’s history of bouncing back and even reaching new highs. True. This is a sound strategy especially if you have time to wait, don’t want to manage your money and don’t mind making up losses. Looking at 2022’s S&P 500 return of a negative 19.4 % what would the market (in this case you) need to make just to get even? If you said 23% you would be correct! In the markets 200-year history that has happened just 25 times! The last being in 2017. Our objective here at GaneWisdom/Market Edge is to help you avoid big losses like these. Instead of making up losses you make money instead!
What should be read into the numbers
Currently the S&P 500 is signaling continued turbulent water ahead, it is now trading below its 50-day and 200-day moving averages – a strong bearish signal not to be ignored.
The housing market is also in trouble. Pending sales have declined 4 % month over month however on a year over year basis we have witnessed a decline of 38.6 % - the largest drop ever!
There were pundits predicting an end to the Bear Market a few months ago when the market was witnessing a classic (though unusually strong) Bear Market rally. While observing many opinions and observations from a variety of sources, we follow our own analysis, and our analysis runs a bit counter to some of these folks. We see a recession happening. Late spring possibly during the summer. The effects will be calamitous for those not heeding the warning signs. Added to the mayhem is the stated goal of the Federal Reserve (which some just continue to simply ignore) to continue to tighten borrowing. When the latest round of interest rate hikes end, we will begin to see the markets move in a sustained positive direction. We may see interest rates begin to level off in the 3rd quarter. Perhaps into the 4th.
This market will wash clean when the Panic Bottom is finally reached.
We believe an S&P 500 at 3,300 +/- will be the indicator for this. Currently the S&P 500 stands at 3,839 as of Friday’s close (12/30/22).
Until then our position is bearish. Investors should be in, or transfer to, cash (Money Market).