Is the correction over? - Holdun

Market Summary

After three consecutive weeks of declines, major stock indexes returned to positive territory this week. However, this positive return masks what was an extraordinarily volatile period.

On Monday, a waterfall sell-off saw the NASDAQ drop more than 4.5% intraday, only to finish the day in positive territory.

Stocks continued to be tossed around for the remainder of the week, with the S&P moving at least 2.25% every single day.

Markets finished with a surge on Friday, erasing losses from earlier in the week, with the S&P 500 closing out the week up 0.8%.

While the ending was favourable, the interim volatility was tough to stomach for anyone who watched the week unfold in real-time.

DON’T LOOK

For most, this week should function as a reminder that you are not doing yourself any favours by watching the play-by-play if you’re not a full-time trader.

Ultimately if you have a longer-term time horizon, you’re adding undue stress and anxiety by over-analyzing each tick higher or lower.

So here is your timely reminder to stop checking prices. Log out of your brokerage app. Remind yourself why you invested in the first place instead of fixating on the daily price movements.

WINNER

Apple jumped almost 10% in the last five trading days following an impressive earnings report on Thursday. The three trillion-dollar company reported its largest quarter ever in terms of revenue, with sales growing by 11% year-over-year (YoY) to $123.9 billion.

LOSER

Moderna continued to get crushed as the high expectations set during the pandemic become harder to justify. Following a meteoric rise, the stock price is now coming back to earth, down almost 40% in 2022.

MARKET OUTLOOK

We have seen some temporary signs of stabilization. Still, volatility is likely to remain elevated over the short-term with geopolitical tensions in Russia, inflation uncertainty and the tapering of economic stimulus at the forefront of investor sentiment.

Our base case remains strong, with inflation likely to moderate as the global reopening allows supply to catch up to demand. This, in turn, will allow the Fed to take their foot off the gas from a rate-hiking standpoint. It is unlikely to be as easy as it has been with valuations stretched in places, but it is hard to get overly negative with fundamental trends so solid.

As mentioned, fundamentals remain strong and should support markets going forward. One-third of the S&P 500’s market cap has reported Q4 earnings up to this point. 79% of those reporting have beaten estimates, valuation metrics are contracting, GDP is at an all-time high and continues to grow, company margins are improving, and consumer demand is now above pre-pandemic levels.

The game isn’t over. It’s just a little harder from here.

HOLDUN