What’s Up With the Markets?

Not much. Prices for stocks, bonds, crypto, you name it are down. Lately it has been a sea of red ink.

Yes we are seeing the occasional “up” days but so far in 2022 the S & P 500 is negative over 14%.

No one should be surprised. The last 3 years have provided investors with way above average returns:

In 2019 the S & P 500 returned 28.88%

In 2020 the S & P returned 16.26%

In 2021 the S & P returned 26.89%

Anyone investing for the first time in any of the above years probably believes that they are genius investors.

Until now. 

So what’s going on?

It is hard to remember everything that has happened since the beginning of COVID.

In 2020, due to COVID and the restrictions put in place, global economies including the US were literally pushed into a recession.

Shutting down the economy didn’t happen because we were in a specific stage of the business cycle. Shutting down the economy was necessary. Recession was a predetermined consequence.

This is something we need to focus on now.

What has happened in a little over 2 years is unprecedented . From recession, to growth, to inflation  and now talks of recession. All in the space of 24 months.

The economy is not in a “normal” business cycle.

No one in March 2020 could tell you what the likely outcome for the stock markets two years in the future would be. 

But some people,  investors who have been around for more than 2 years did know from experience that eventually prices would go back up. Those willing to buy in March 2020 when prices were low have been rewarded.

Something else has happened over the last 2 years. New investors entered the market.

Lots of new investors.

I don’t care for the generational labels, but  Gen Z and Millennials jumped into the markets in 2020 and 2021. Over 20 Million new brokerage accounts were opened.

This is good news for everyone. More investors in the markets adds to liquidity in the markets. 

Having eschewed traditional relationships with financial advisors  (I’m all for that), one source of financial learning and education for Gen Z and Millennials is coming from social media and “Finfluencers”.

I am wondering what the new generation of financial influencers is saying today, because it is likely that they too are experiencing a down market for the first time.

My concern is that new investors don’t STAY invested in the markets. That the suddenness of this downturn discourages them from investing.

Just like 2020 though, this is exactly the time TO invest. Yes prices could go down further from here and that is okay. 

Gen Z and Millennial investors like to get information from people who are most like them, one of the common denominators is age.

Warren Buffet and Charlie Munger have proven year over year that their approach to investing is worth learning about.

Warren Buffet is 91 years old, and Charlie Munger is 98. Not exactly the Tik-Tok generation.

They have become billionaires, not by trying to get rich overnight, buying meme stocks or bitcoin but by sticking to fundamental principles of investing that anyone can learn.

And that is also the point. 

Investing isn’t generational. The process of investing has changed through technology. The ease of investing has changed, for the better. 

But different generations tend to listen to and follow the people who are most “like them”, and sometimes that may not be the best idea.

The professional investment community includes investors who are “in the markets” daily. Their job is to make investment decisions that will benefit shareholders of mutual funds or exchange traded funds. 

They are not Tik-Tok stars or social media Finfluencers.

They are the investors who are held accountable for the performance of the funds they manage.

They are the investors who fall under regulatory guidelines that prevent them from spreading misinformation, or giving investment advice that is just plain wrong.

The point is this: 

You do not have to know all the reasons stock prices are up or down.

What you need to know is how to find investment opportunities in any market environment.

And today is a great time to invest.

“A prediction about the direction of the stock market tells you nothing about where stocks are headed, but a whole lot about the person doing the predicting”

Warren Buffet

This website is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, nor does it constitute an offer to provide investment advisory or other services by The Modest Economist LLC.