Market melting puts investors on edge: Community talks

Sell ​​in May and leave? If alone. Sales started fast and furious in January and are not stopping.

The Standard & Poor’s 500 Index is down 18% since the start of the year and is a Grizzly Bear Paw swipe of entering bear market territory.

Photo illustration by staff; Dream time

The tech-laden Nasdaq has already been sliced ​​and diced, down 28%, as investors deal quick and heavy blows to growth stocks, especially those with the most expensive valuations, as the Federal Reserve raises interest rates to curb inflation. to fight.

While young investors should be aware of the current market weakness a buying opportunity older investors miss the luxury of time to see something good in a phalanx of red arrows downward flashing in their portfolios. Mathematics explains why. To make up for a 50% loss, an investment must rise 100%. With that uplifting fact in mind, let’s take a look at what captures the imagination of the Barron’s Advisor community.

Retirees find few places to hide when the markets tumble. The S&P 500 is heading for its second worst start in history based on the first 90 trading days of the year. To make matters worse, traditional safe havens have violated tradition. “This is probably one of the few times, if ever in a person’s investment life, when gold or fixed income isn’t a safety net,” said Dan Ludwin, president and co-founder of Salomon & Ludwin. We asked practitioners what do they recommend that customers do? And readers weighed in.

Raymond Drogan prefers a pragmatic, lower-risk approach, advising investors to “buy quality names”. Mike Bachan recommends investors “go for Series I savings bonds.” His comment scored 12 thumbs up votes and 3 down. The inflation-indexed bonds currently pay an annualized rate of 9.62% interest through October.

‘Disruptor’ stocks torpedoed as old-school names held up. It turns out that many businesses previously hailed as disruptive simply took advantage of Covid lockdowns. Today, these former high-flyers resemble battered pinatas. Robinhood Markets (HOOD) and Peloton Interactive (PTON) are each 90% below their 52-week highs, while Teladoc Health (TDOC) is down 83%. While rising interest rates, high inflation and the disappearance of FOMO have contributed to brutal selling, shares of more traditional, disrupted “old-school” companies are going much better† Here’s a sampling of what readers had to say.

Ray Noack wrote on May 7, “the damage is staggering as 22% of all stocks listed on the Nasdaq have fallen more than 75%.” Bharat Bhatia states, “This entire bubble in many stocks was all driven by the Fed’s liquidity — and you can map the 100% correlation with stock prices since the Fed unleashed the biggest money-printing event in human history.” Bhatia continues: “What did they think was going to happen? Fed was stupid for letting it go on for so long and everyone got drunk at the party. Finally, in December, the Fed took away the punch bowl and that was the time to sell.”

But some thematic investments look attractively priced. While the recent carnage of former high-flyers has penalized the prices of many thematic ETFs, investors should remember that these funds were built to thrive over many years. They are not meant to be flipped by day traders. As such, the current weakness could cause: an attractive entry point for investors who want more exposure to long-term economic trends, can bear short-term risks and have the luxury of time. Commentators praised the article but expressed concerns about these funds.

Damiano Varvaro wrote: “Good to read. If theme investing can lead to a 40%-50% drop, why bother with ETFs and pay a fee? You can buy just ten or twenty stocks in that sector and create your own ETF. Better yet, how about ten or twenty best performing out of the S&P 500 and well diversified?” Barry Singer warned that “the democratization of theme investing could lead to the next big debacle for inexperienced investors. It seems almost anyone can create an ETF stock basket with a catchy marketing name.” He adds, “This over-basketing of the same companies in many ETFs can lead to huge losses in those individual stocks when these baskets are unwinding in a serious market downturn. It could happen now in the Covid ‘stay at home stocks’. Buyer beware.”

What advisors need to know about canceling student loans. As a result, lighting is being worked on in one way or another. However, with so many moving parts of the federal student loan system, financial advisors can struggle to keep up with the latest developments† This article, designed to help advisors prepare their clients for multiple scenarios, raised some skeptical comments.

John Kling wrote: “The Constitution established Congress as the primary player in lawmaking. While divided opinion in the public and Congress makes legislation difficult, the answer is not to grant or extend unilateral executive powers.” Robert Fleming wrote: “Perhaps the graduates can use their newfound skills to negotiate with the schools or argue their case in a small claims court. Anyone who earns 125k a year can pay off their student debt.” Bill W. asked, “If your loan isn’t worth it to you, why is it worth it to me?”

Please check out past community conversations and let us know what you think!

Write to Greg Bartalos at [email protected]

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