As you might expect, this week’s Weekly Market Review is riddled with bad news. It is also riddled with economic data that reflects how strong the US economy is.
In my opinion, this strong economy is why we can be confident in our investments, despite recent downturns in stock prices. Large, long lasting market corrections coincide with economic recessions. Our economy is actually very strong right now and the chances of entering into a recession are very remote.
As detailed by the WMR in the first paragraph, consumer demand has outpaced supply creating inflation issues. Raising the interest rates is the best tool the Federal Reserve has to fight inflation. The first paragraph also mentioned the unbelievably strong jobs report from February. This many people going back to work is not indicative of an economy headed towards some dark and scary time. Notable Number 2 highlights the eye-popping number of people who quit their job in 2021. People do not quit their jobs during tough economic times; people quit their jobs when they feel financially secure and feel confident about landing a new, better job.
The news is scary though, and headline news drives the markets in the short run. So the short run has not been good with stock market indexes loosing 10% to 15% in 2022. As with every horrible and scary event in the last 100 years, the new news will not be new for very long. The market will digest this news, level off and return to trading activity based more on the actual economics of publicly traded businesses. The economics of these businesses are, by and large, good to very good.
It’s hard medicine to swallow because the fear that can sneak in when the markets are going down is real, but the medicine of staying put and keeping your resolve have benefited investors in the long-term over and over again.
As always, we hope you find the Weekly Market Review both interesting and informative. Have a good week!
Trevor N. Coe, CFP®