Dear Stock Market,
You have been #StraightOutta returns #BacktoBack days and my portfolio is #SuperUgly but this is #TheWarning I’m about to drop the hottest diss track of 2015 on you. I’m about to drop #Ether on you and all your index fund friends so you can’t say I didn’t #HitEmUp too.
An Angry Hip-Hop Inspired Investor
This was one of my more creative Facebook posts of 2015 and heavily inspired by the movie Straight Outta Compton. I was channeling my inner Ice Cube as he hit the studio with his notorious diss track titled “No Vaseline” because I was upset about hos volatile the market had become without real explaination. Hindsight is 20/20, so let’s take it back to mid-August and reflect on some of the most pressing issues of the time:
- Donald Trump and his political incorrectness and audacity to be ignorant in more ways than one
- State of Emergency declared in Ferguson over protests held on the first anniversary of Michael Brown’s death
- Unemployment reaching a 7-year low at 5.3%
- Tom Brady beating Roger Goodell and the NFL in a case calling for a 4-game suspension of the future Hall of Fame QB
While the world was blaming Tom Brady for a crime no one can prove he committed or wondering how Donald Trump could be taken seriously as a presidential candidate, the stock market took a real blow. The global economy took a big swing as China’s economic woes were exposed, but like they say all things that are done in the dark come to the light. It would be wrong to put all the blame on China.
During the same period the US Dollar was very strong, meaning that the US Dollar could purchase foreign goods, but people looking to buy US products would have a weaker currency so it took more of their currency to buy the US product. Also the price of oil was dropping and the price of household items was going up, but wages were staying the same. People were more likely to put their money in a savings account than the stock market. My post about saving vs investing addresses this in more depth, but people in the US were looking for low risk and getting low interest rates on their money.
Now fast forward 4 months and unfortunately we have run into another rough patch for the stock market. Yesterday was a pretty decent recovery but data shows that one of the most well known market indicators (otherwise known as an index) is down 2% on the year. That’s the worst we’ve experienced since the 2008 Recession.
This would generally be where the risk averse ditch the stock market because you really don’t want to lose money. But understand markets do correct themselves over periods of time. We had significant growth of equities from 2011 to 2013 and in 2014 the US market recorded all time highs. However, the past 6 months have been haunted by the Fed increase of interest rates, low oil prices and other indicators that the powerful year over year gains are coming to an end. Instead of using this as a reason to stay out of the market, use this time to research what companies are doing to regenerate growth in their companies and spark enthusiasm for their investors. Are companies offering new products or services? Are they expanding into the emerging markets like India or Brazil? Or are they looking to improve the quality by choosing more vetted and seasoned suppliers? Whatever companies are doing now to adjust for the changing US and global economy will have an impact on their stock performance in 2016 and beyond.
Tasia’s Advice: Keep your eyes open for opportunities. Don’t close them in fear of the unknown.