Not necessarily. These things happened pretty regularly, especially when headlines are negative.
In fact, you may recall that we kicked off 2022 with a big drop.
So, let’s talk about what is behind the latest wild market ride.
What led to the selloff?
Primarily, economic worries.
Worries about new COVID surges.
Worries about the U.S. economy.
Worries about international politics.
A report just came out showing the economy shrank by 1.4% in the first three months pf 2022, surprising analysts who expected 1.0% of positive growth.
Though a single quarter of negative growth isn’t a recession, it is a sign that inflation and the pandemic hangover are weighing on the economy.
Realistically, some form of slowdown was probably inevitable, given the massive economic recovery of 2021.
And, the news isn’t all gloom. 1) This is a preliminary report, so we will see more revisions later. 2) Economists still believe the economy has plenty of room to grow, particularly given the strength of the job market, so the economy could rebound. 3) Americans are continuing to spend.
The economy is still strong, but it is showing cracks. We are watching closely.
You can see a theme: markets are being driven by worry and fear.
Is the selling done?
That is impossible to say.
Could we see a bigger correction or bear market?
Absolutely that is possible.
Corrections and pullbacks happen frequently.
Here is a chart that shows intra-year dips in the S&P 500 alongside annual performance. (You’ve probably seen this chart before.)
Take a look at the red circle to see the market drops each year.
The big takeaway? In 1 of the last 22 years markets have dropped at least 10%.
We are dealing with a lot of uncertainty in 2022 and investors are feeling very cautious about the future.
However, that doesn’t mean that we should hit the panic button and exit our strategies.
Knee-jerk reactions to market turbulence can be VERY costly.
We are here, watching the situation closely, and will reach out to you directly is we need to make some changes.
Questions? Concerns? Please reply to this email and we will get back to you within 24 hours.
Thanking Calm Thoughts,
Your Prevail Family
1 – https://www.cnbc.com/2022/04/25/stock-market-futures-open-to-close-news.html
2 – https://www.cnbc.com/2022/01/23/stock-market-futures-open-to-close-news.html
3 – https://www.cnbc.com/2022/04/28/us-q1-gdp-growth.html
4 – https://www.washingtonpost.com/business/2022/04/28/gdp-2022-q1-economy/
Archived PDF link
5 – https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/market-insights/guide-to-the-markets/mi-guide-to-the-markets-us.pdf
FAQs – Is the Selling Done? – Prevail Strategies
It refers to whether the recent market selloff has ended or if further declines may occur due to ongoing economic uncertainty and negative headlines.
Markets declined primarily due to economic concerns, including inflation, COVID-related disruptions, geopolitical tensions, and a reported contraction in U.S. economic growth.
No. While the economy shrank by 1.4% in the first quarter of 2022, a single quarter of negative growth does not meet the definition of a recession.
Analysts had expected positive growth of around 1.0%, so the reported contraction was worse than anticipated and contributed to market volatility.
No. The report referenced is preliminary, economists believe the economy still has room to grow, the job market remains strong, and consumer spending continues.
Markets are often driven by fear and uncertainty, particularly during periods of economic transition or when headlines focus on potential risks.
Yes. Market pullbacks and corrections occur regularly and are a normal part of investing, especially during uncertain periods.
The commentary notes that in most of the past 22 years, markets experienced intra-year declines of at least 10%, even when annual returns were positive.
Not necessarily. The commentary cautions against panic-driven decisions, as knee-jerk reactions to market turbulence can be costly.
The update states that Prevail is monitoring conditions closely and will contact clients directly if changes become necessary.
No. The commentary explicitly states that it is impossible to know whether the selling is finished or if further declines may occur.
Investors are encouraged to reach out with questions or concerns and will receive a response within 24 hours.
“All investments involve risk, including loss of principal, and returns are not guaranteed.”
