The Start of 2022 Signals Caution for Investors
Happy New Year! I hope the first few days of 2022 finds you and your family well. 2021 brought many challenges to our nation and it appears some of those challenges will follow us into the new year. Some of those challenges certainly impacted areas of the market, some positively, others not. Many investors are asking what to expect this year regarding this year’s stock market performance. One thing I definitely know is that no one ACTUALLY knows what the stock market will actually do in the future. What we can do is take the information we know to make informed decisions regarding our future investment actions.
Investors are still feeling overwhelmingly positively about the market and that is good for market returns in the short term. As investors continue pouring into equities the momentum will likely keep dragging markets higher. Much like a car rolling downhill in neutral, tapping the brakes initially doesn’t do much to curb the momentum. However, keep pushing on the brake pedal long enough, and the car will slow to stop. There are certainly “brakes” that exist in the current investment environment. Inflation may remain more persistent than anticipated which impedes consumption and compresses profit margins. The Federal Reserve has already began its taper of assistance and we will likely see rate hikes on the near horizon. Additional stimulus seems unlikely at this point, if we see any it will be widespread checks to households seen in 2020 and early 2021. This will probably lead to less liquidity in markets as Americans won’t have the “cash to burn” they did after other stimulus checks. Economic growth has shown some signs of stagnation.
In today’s changing environment, what should investors do? I believe the New Year is the perfect time to look over your portfolios and see if any changes should be considered. Do you know what positions you hold and more importantly do you know why? Every position should have a specified purpose. Is the allocation there for long term growth, to hedge against inflation, for principal stability, or to provide diversification from other portfolio positions? More importantly, is the allocation still working? If your answer is “no” or “I am not sure” this could be an important time to get those questions answered. If the position is not working now, investors should consider if it needs to be replaced. Investors should also understand that if we do see significant changes like what is outlined above then what has been working well for the past few years may not continue to. It is possible we will see a rotation from growth to value in the future, particularly if inflation continues to rise unchecked. It is also quite possible that what HAS been working for the past decade (growth, tech, etc) will also continue to reign supreme. As you remember regarding future market performance “no one knows anything” . We can only do our best to hedge our bets based on the information available. We will continue to use math and rules-based investing to find areas of positive momentum and growth for our clients in the coming year. If you have any questions about your current portfolio please don’t hesitate to reach out as we are always happy to help. Wishing you and your family a very happy new year!
Ashley Rosser, President
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.