Markets “In a Nutshell” for March 6, 2023
Investment Week at a Glance
Stocks finished higher for the week. The Dow Jones Industrial Average rose 1.70%, the S&P 500 was up 1.90%, and the NASDAQ rose 2.60%. Foreign stocks (MSCI EAFE) were also up, rising 0.80%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.96%. (Data source: Wall Street Journal)
Markets Rebound, Will It Last?
Markets were able to rebound after falling a couple of weeks prior. Once again tech led the way as the NASDAQ was up nearly 3% and back up over 11% for the year. In comparison, the Dow Jones is just barely up for the year and the S&P 500 is in the middle of the two up 5%. When looking at what needs to happen for a market rally to continue there are a few big ones. Inflation will need to continue to fall at a certain pace that gets to a point where the Fed does not raise rates more. Once the Fed stops raising rates this would give the market a reason to rally as it is still unsure where rates will end up once the Fed pauses its rates hikes. The other drag on the market currently is the earnings revisions that have been coming out. Last year the expectation was for earnings to rise by 10% in 2023 and current expectations are down to under 2%. If these continue to fall this would move the market lower and most likely the economy would see a recession.
Why It Is Important to Stay Invested
As volatility continues in the market, it is important to remember to stick to your investment goals and not make rash decisions. Since 1988 if you had $10k invested in the S&P 500 and did not touch it, you would have over $157k today. If you had just missed the 10 best days trying to time the market, you would have $72k, which is less than half just by missing 10 days in the market. Although you may think pulling money out of the market until there is less uncertainty is safe, it could cost you half of your portfolio in the long run. There will always be a certain amount of uncertainty and even when things look good as they did right before Covid hit, all it takes is one event to send the market into a frenzy. Some of the best buying opportunities are actually when many people are fearful of the market.
How often does the stock market decline 10% or more? (Scroll Down for Answer)
Have a Great Week!
1) Every 1.2 years, the stock market on average falls by 10%+ almost once a year. This shows that, even though no one likes to admit it, the stock market sees volatility all the time and is never a straight line up.