US stock market is entering a new era of higher interest rates in few days.
Starting in March stock market will face a new challenge of an increase of 50 basis points in Fed funds rates, impact of this will be felt in many ways :
Higher Prime rates
Higher Mortgage rates
Higher payments on may line of credits / interest rates tied to prime.
Higher monthly payment on all borrowing will curtail spending
Stock market will go in ICU again....
Stock market hates uncertainty in any shape size or form especially higher payments for most.
Corporate profits will be impacted with lower Sales on many front
Corporate borrowing cost will jump
All in all not a minor blip
US stock market action recently is giving every indication that go go days of 2020 is long gone, buy and hold may not work.
US stock market has changed, lot of jitter and lot of pain for participants.
US stock market will require a " new skill set " to navigate through frequent volatility
2020 bad habits may not go so easily as it was so simple to go with the flow and quadruple your money...
Current market environment is such that losing money may be a recurring phenomenon....
Higher interest rates which may jump again in May leaves little time for error or rebuilding equity.
Expect a very difficult first 6 months of 2022
You do have few choices to deal with new and difficult US stock market :
Reduce exposure by @ least 50%, 25% exposure is recommended
Try to be nimble, go for quick singles and wait for another opportunity.
Completely stay out of stock market until October of 2022, which may present a very nice entry point.
Based on the above choices, IF you stay in even with less exposure, do not look @ bargains, look for restart of economy stocks in a well diversified format.
IF your selection does not make you money in 1 week, then you have to start all over quickly with different set of stocks....
I think I have made my points very well, it is up to you to thinks and act based on your own comfort level & understanding of current market environment.
BLOG does NOT give buy or sell.
Saleem
2 comments:
Hi Saleem,
Last week: +8.64% (YTD: -15.80%)
Notable Leaders: USER SNAP ENPH GMBL
Notable Laggards: BMEA
The whipsaw continued and the portfolio rocketed higher after many names were deeply oversold and some good earnings finally shone through. The volatility alone makes the market treacherous, but I think investors are starting to realize that 2% interest rates do not highly impact growth stocks of 25%+, especially when that growth should be bolstered by a better economy. Granted many of these stocks were stretched too far for over a year, but investors are now sifting through the rubble to find the good ones. Last year was unique in that any stock did well - this is not the normal as proper stock picking has always ruled for me and others. I look forward to getting back to basics in 2022...
Holdings: ZIP VERI SNAP UPST PLAY ENPH CXM PINS SSYS USER ZENV BMEA GMBL, cash 0%
I am looking at LYFT for future investment as I feel owning a car in the future becomes less and less appealing with average car usage per vehicle below 10%. The average car sits in a parking spot for the vast majority of the day. In this era, that's an unacceptable inefficiency. An issue with this investment, however, is the worker classification debate that could significantly increase costs in the future. A positive optionality would be a takeover by any number of suitors looking for growth in this industry.
Stocktrader
Hi Stocktrader,
Last week UP 4.18%
YTD UP 2.66%
Saleem
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