Dear Besieged Client,

Today the financial markets dropped the most since June 2020, the dark days of Covid.  Please refrain, however, from kicking your dog or jumping out of planes without a parachute.

Hang in there!  As the market continues to rock and roll we find ourselves taking the step backward that I’ve talked about before. We enjoyed the two steps forward for the last few years and now we must hold on tight as we move in the other direction. 

We just recently wrapped up the first three months of the year and it did not come too soon. However, there has been some rebound. At my last dispatch in March, the S&P index of 500 stock performance was down more than 12% for the current year. Since then, as of today we’ve recovered almost half of that loss and are down 7% for the year currently. Meanwhile, tech stocks were down 20% last time we talked and have recovered somewhat to be down 16% for the current year.

Putin and his army continue their relentless, if not efficient, attack on Ukraine.  In reaction, the western world has implemented more and more economic, business, and banking restraints on the Russians.  Oil and other commodity prices are at historic highs, and stock prices of many companies are quickly declining.

Some of our investors are nervous and wondering whether they should be doing something to defend against this, and perhaps even do something special to profit in the falling market.

As of the end of today, the S&P group of 500 stocks is down 12% year to date.  Tech stocks as a group are down almost 20%.  A few clients have extrapolated this to conclude that if things keep going like this, we will have no assets in 10 months— five more sets of 2 months multiplied by the 20% loss.

Hold on to your coffee cups!  As the Ukraine situation develops, the stock market has dipped 7% in the last five days.  For the year it is down almost 14%.

Despite Ukraine, half of this drop for the year can be attributed to the Federal Reserve’s threatening to increase interest rates to slow inflation—and the economy.  And, as I said in the newsletter, recessions usually come with a 20-30% dip in the stock market.

Unlike what happened in Kuwait when the allied countries came in with a military pushback, it appears that Russia will conquer Ukraine with little military resistance from Ukraine or the world.  It seems that the worst could happen is that Russia may face some guerrilla resistance for a time.  Sanctions between countries have become almost a yawn, and severe ones have been circumvented “under the table,” as they probably will be this time, too.   The result may be a bounce back in market confidence later this year—or sooner.

TD Ameritrade is required by law to report instant and constant valuations on all assets our clients own.  As we monitor our accounts, these ups and downs can be alarming.  What is our consolation during this period?  Knowing that what we own is of a quality substance:  Common stocks and funds of good companies that will continue to be successful.  And, diversification in our portfolios will also smooth out dips along the way.

Yes, we are on the hunt for investment bargains, too—there are more and more of them.

As one investor today said, “Don’t bet on the end of the world—it only happens once and the odds of it happening aren’t very good.”

John  and Seann and Nicholette