It is very easy to forget the volatility during stressful, and short-term, disconnections in pricing and value perceived in markets. There is no more powerful force than an emotional twitch which then triggers a domino effect, something we’ve seen up close the last few weeks.
Setting the Stage
The latest frenzy erupted from Fed minutes, further indicating the emotion-triggering nature of the selling and re-entry into the all-too-boring trade range. The bigger numbers get, the “scarier” they feel and the hastier pockets of retreat.
During all of this craziness, there’s one group not selling at mass, insiders. Those who operate companies, own large stakes in companies, and whose net worth is often directed by the long-term value of those companies are not rushing to sell off. There has been little – if any – insider selling for many months now.
What Does This Mean?
Who do you think knows, sees, understands, and can properly comprehend better how things are really unfolding out there? Those same insiders. Further, remember that since 2008-2009 and the huge deflationary forces ignited during the Great Recession, we have been trying to create inflation.
The Global Pandemic Shutdown has driven a reasonable reaction – and true need to completely dismantle and rebuild a global supply chain, protecting from further events like what we have lived through during 2022-2021 and into 2022. The message here is this: it’s important not to let your emotions impact your investments.
Fall in Love with Volatility
It’s hard not to jump straight to panic when top tech stocks crash or the price of groceries skyrockets, but it’s essential to understand that volatility is in fact your friend. When investors are terrified and selling – opportunity is only building, foundations are solidifying and the future rate of results is adjusting upward.
There is no doubt that near-term churn events like we are kicking the year off with, lead one to feel like they are mentally walking through quicksand at times. Further, the trade range aspects continue to draw back in price action as the churn proceeds. Those points are below:
- The NASDAQ is standing at prices seen in August 23, 2021 almost to the closing tick (last summer)
- The S&P 500 now stands at the same price level as back on November 4th, 2021
- The DOW settled in at the same levels last seen on November 1, 2021 – but that was AFTER touching levels seen back on August 16th – during the trade session.
In other words, the internal adjustments have put us in a spot where we have been essentially jogging in place for several months. Quietly, increases are staged into the numbers – even as price action is sloppy.
As tough as it feels near-term, long-term targets suggest we must let this storm pass – just like the others. Buckle up, stay patient, remain focused on the long-term pathway ahead. The ugly start to the year probably has some more work to be done – setting the stage for the next valuable foundation from which we leave this base camp – and continue the trek up this mountain.
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