On Friday, the Nasdaq capped a third straight week of losses while the S&P 500 also posted a third straight losing week, down 2% for the week. Even the Dow Jones Industrial Average, which had been outperforming, snapped a four-week win streak, falling 2%. The S&P 500 came into Monday’s bumpy session down 5.7% from its recent all-time high. A growing sense that a recession (likely limited, if it does occur) was on the horizon and that the Fed was twiddling its thumbs on the rate cut front permeated markets.
Fed funds futures began pricing in a high likelihood of a 50-basis point rate cut at the Fed’s September meeting, while analysts at major investment banks forecast multiple half-point cuts this year and even the potential for an emergency cut before the next scheduled meeting. All that was based on the nonfarm payrolls report which showed employers added 114,000 jobs in July, less than the 175,000 that economists were expecting. While this “miss” led to a turbulent day on Friday, all of these indices closed well above their intraday lows. While certainly disappointing, July’s job gains were still solidly in positive territory, and it was only last week that the government reported that GDP grew by 2.8% in the second quarter So, is this sell-off an overreaction? Quite possibly. With the sharpness of this correction, we’d expect to hit oversold values at some point…and rather quickly at these levels…and therein lies the opportunity…
Wait, what? How???
For us, the long-term investor, corrections/drawdowns/pullbacks, call them what you may, can be significant opportunities to pick up or add to positions that are experiencing weakness. That said, the current market turbulence seems to be setting up for just such a prospect. Not only is the market currently running over a rough bit of road, but the things that are scaring investors today (such as the payroll report, inflation, recession fears, what the Fed will do next, etc…) are the same types of things that have scared us in the past. However, when we look back, we find that in the vast majority of cases the market ends up higher in the future, in spite of the current “apocalypse du jour.”
So, what to do now? This could be a great time to buy/add into a lower market. Take advantage and make your annual IRA contributions and buy while the market has pulled back. Whether you’re contributing to a Traditional IRA, Roth IRA, SIMPLE IRA or SEP, this dip in the market looks to be a golden opportunity to add to those accounts. Same goes for non-retirement accounts – this could be an excellent time to pick up or add to, some of those “big names” that have backed off their highs.
As always, if you have questions or would like to chat more about this, please give us a call! You can reach us directly at 518-877-6600 or via email at leo@nicoterawealth.com / austin@nicoterawealth.com.
If you know someone who may need help with their retirement plan / investment portfolio or would just like a 2nd opinion, please introduce them to us and we’d be happy to help!
Disclosure: This piece is for informational purposes only and contains opinions that should not be construed as facts. Information provided herein from third parties is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Charts and graphs are for illustrative purposes only. Discussion of any specific strategy is not intended as a guarantee of profit or loss. Past performance is not a guarantee of future results. Objectives mentioned are not guaranteed to be achieved. All performance referenced is historical. All indices are unmanaged and may not be invested in directly. Tactical allocation may involve more frequent buying and selling of assets and will tend to generate higher transaction costs. Investors should consider the tax consequences of moving positions more frequently. All investing involves risk, including loss of principal.
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