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Today’s newsletter is by Brian Sozzi, an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
Monday, May 23, 2022
I remember very little from my life before the age of 10.
However, I vividly recall hurling a rock at some kid’s back in the fifth grade, which I did for no other reason than I had a knack for throwing things far and with speed.
Said classmate turned around and smiled, before he slowly approached me and punched me in the face. I remember thinking at the time— “Geez, I should have seen that one coming and protected myself.”
No blood, but I won’t say it didn’t hurt. It obviously left an impression if I am writing about it 30 or so years later. And these days, investors might be feeing the same way.
Or, as Wall Street veterans tell me, investors have been shocked by a more hawkish Federal Reserve, bruising inflation that refuses to die an ugly death, and a corporate profit slowdown at major companies like Walmart and Target. All of this has created a “miserable” stock market backdrop that has led to “rotten” sentiment amongst investors, long-time market strategist Steve Sosnick said on Yahoo Finance Live.
So what should you be doing at this moment in time with your investments?
Chances are your portfolio has been hammered. Chances are your confidence has been shaken. Chances are you on the cusp of making dumb decisions to try to make back all those gains in a single session.
And chances are you are wondering why you — like fifth grader Brian Sozzi — didn’t protect yourself before getting walloped in the face.
To this end, I give a thumbs up to the practical advice shared by Merrill Lynch Wealth Management president Andy Sieg on Yahoo Finance Live last week.
I appreciated Sieg’s tone around this guidance, and how much sense it makes when everything seems so confusing as it does today, and I’d encourage readers to consider his perspective carefully:
“That is precisely the challenge in which everybody, when they open their [trading] statement, has that feeling [of not being calm]. And so, number one, we got to know what we own. And do we like what we own in our portfolios? Do we feel good that our long-term asset allocation is consistent with the time horizon and the kind of risk we want to take? To the extent that the answer to that question is yes, in some cases, what you should do right now is make relatively modest portfolio adjustments.
Interestingly, one of the things right now you can do, to the extent you like your exposures, you like your asset allocation, you should be thinking about some tax loss selling and taking advantage of that right now. We get a lot of questions from clients about, is this the right time to get into the markets? That’s where coming into the market step by step, dollar cost averaging, is very important. So there’s a lot to think about right now.
But unfortunately, many times, our instincts go to, hey, let’s just leave equities altogether. Let’s liquidate portfolios. When you look back over time, it pays to be exposed to the equity market over time. Over the last 80 plus years, if you were just out of the equity market the 10 best days of any decade, your return over the last 80 years would be something like a cumulative 50%. If you were in the market the entire period, exposed to equities all along the way, your cumulative return would be 21,000%. So, you know, that’s the risk that individual investors have overreacting to this environment.”
As always, stray strong and Happy Trading!
Odds & Ends
Yahoo Finance Descends on Davos
Yahoo Finance editor-in-chief Andy Serwer and yours truly will be on the ground all week at the World Economic Forum in Davos, Switzerland. It feels great to be going back at this event — which is akin to my Super Bowl — after two plus years of being away due to the COVID-19 pandemic. And it of course comes against the backdrop of a stock market in free-fall and world dealing with a host of fundamental challenges.
Andy and I have a host of very impactful interviews planned with the who’s who of global business. Be sure to stay engaged with us on Twitter (@Serwer @BrianSozzi) and on Yahoo Finance Live. Moreover, feel free to send us things you want to know from these power brokers. We are here to serve (and aren’t simply going to get selfies with gazillionaires in the Swiss Alps, that’s not how we roll) and help you navigate the markets (and life) with success. Here’s a short preview below.
What to watch today
No notable reports scheduled for release.
Zoom Video Communications (ZM) is expected to report adjusted earnings of $0.87 per share on revenue of $1.07 billion
Advance Auto Parts (AAP) is expected to report adjusted earnings of $3.61 per share on revenue of $3.38 billion
Nordson (NDSN) is expected to report adjusted earnings of $2.29 per share on revenue of $646.90 million
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