Welcome to May!
I want to alert you that we are changing the broker-dealer we use for our practice from Securities America to Kestra Financial, effective May 10, 2022. My new email, starting May 10th will be jim.mccarthy@mywealthdirection.com. All our other contact information (phone, fax, address, website) remains the same. We will be in touch immediately after the switch.
So far, 2022 has not been a good year for the financial markets. Inflation, rising interest rates, and a terrible war in Europe have all conspired to create downward pressure on financial markets. Both equities and bonds have seen sizeable declines through April 30, 2022. Bonds, which usually provide a safe haven when stocks decline, have actually declined more than stocks on a relative basis. While bonds have been on a slow steady decline, stocks have seen major declines followed by quick rebound rallies, only to stall out and decline again.
We raised cash back in the middle of January when we first felt the market was vulnerable to a correction. We reinvested some of that cash around the lows in late February and late March. We continue to have a higher than normal allocation to cash in our client portfolios, which has proven to mitigate the decline in portfolio values. All client’s portfolios have declined YTD but most have declined significantly less than the overall market.
The stock market (using the S&P 500) has been stuck in a pretty wide range since the 1st week of January, depicted by the yellow and red lines on the chart below. The thing that concerns me is that the pattern that we saw in 2021 of the market rallying off of any declines (see the green trend line), was broken when the decline in January reached that trend line and, rather than bouncing up off of it, blew straight thru it. More importantly, each time the market has rallied this year it has not been able to get back above the green trend line. While the green trend line served as support in 2021 (stopping any declines) it has now become resistance (stopping any rallies). Until stocks can rally up to and through the green trend line we are likely stuck in a choppy sideways market.
We are also watching happens over the next week as stocks are at the lower end of the range. If they fail to rally here, it opens the possibility of further declines. We will take appropriate action based on how the next week plays out.
We hope you find this report informative. Feel free to call us with any questions or concerns. Please share this report with anyone you feel will benefit from it.
May Calendar of Events (comments and additions for future months are always welcome)
- May is National Mental Health awareness month. Nearly 44 million American adults, and millions of children, experience mental health conditions each year. Let’s all get educated on this issue and work towards acceptance and inclusion of people dealing with mental health issues.
May 4th Rich Sanchez’s 30th birthday
May 5th Cinco De Mayo – stay thirsty my friends
May 8th Mother’s Day – wishing all mom’s, grandmothers, and great grandmothers a wonderful day. Hopefully soon we can get together to celebrate.
May 13th My grandson Miles’s 9th birthday
May 21st Armed Forces Day. Dedicated to recognizing those presently serving in our armed forces. Let’s pray they aren’t drawn into service in Ukraine.
May 23rd My daughter Caryn’s 30th birthday
May 30th Memorial Day – let’s remember and give thanks to all who served our country
Sources: StockCharts.com, Y Charts
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