May, 2022
Stocks Slide
Trading was volatile in the final week of April as investors struggled with the crosscurrents of global economic growth anxieties stemming from widening COVID-related lockdowns in China and a fresh batch of corporate earnings reports.
Monday set the tone for the week. Stocks staged an intraday reversal, wiping out a deep morning decline to end the day higher. After broad losses on Tuesday and a choppy session on Wednesday, stocks mounted a powerful rally Thursday thanks to positive corporate earnings reports, overcoming a disappointing first-quarter Gross Domestic Product report. Stocks could not sustain Thursday’s momentum, as Friday witnessed a broad-based retreat to cement another week of losses.
The volatility continued into this week starting the week on a negative note, injecting some positive movement following the fed decision on Wednesday, followed up by some strong downward movement on Thursday.
Economy Contracts
Following the torrid 6.9% annualized GDP growth rate in the fourth quarter, economists had expected economic growth to moderate to about a one-percent gain in the first quarter. Instead, the economy shrank at an annualized rate of 1.4%, dented by a slowdown in inventory investment by businesses, a jump in the trade deficit, and a decline in defense spending.
Consumer spending held up, rising 2.7%, though the gain was amid higher prices. Some economists expect the economy to resume its expansion for the remainder of the year, which may be one reason investors shrugged off the negative surprise.4
Intra-year Declines
While the current market crisis is ever changing, to keep things in perspective, we must remember that the recent market volatility is not at all unusual. In fact, we have had a lack of downside volatility (with the exception of the flash crash caused by news of the pandemic) and the recent drawdown of the market was simply a return to average intra-year volatility.
Over the last 40+ years the market ends the year in positive territory 75% of the time (3 out of 4 years) and in all those years that the market is positive, the average drawdown during those years was over 14%! From peak to trough, the S&P was down 13.3% through April 29th in 2022 which is in line with the historical average. Because the fundamentals of the economy remain strong, despite what certain news media outlets report, we still continue to believe that while this year will be rocky, the possibility for a positive year of performance is still present.
In the chart below, you'll see the intra-year declines (indicated in red with a red dot) corresponding to that year's annual return of the S&P 500. Many may be surprised to see how many years end with positive performance in spite of short-term negative performance within that year.
Source: Guide to the Markets | J.P. Morgan Asset Management (jpmorgan.com)
Increased Volatility
As we alluded to earlier this year, market volatility is on the upswing for 2022. Many factors contribute to this increased volatility, including inflation, rising interest rates, the war in Ukraine, and the fact that it's a midterm election year. The chart below defines volatility as the number of single day stock market returns plus or minus 2%. 2021 was a quiet year in the market, but as you can see 2022 is shaping up differently, already doubling the number of 2% days compared to last year. So, if you're feeling like the market is wilder lately, you'd be right!
Why Freeze Your Credit?
Not so long ago, locking your car doors and installing a home security system were considered gold standards to protect yourself against theft. As the world evolves and technology advances, however, we need to bolster our strategies to mitigate the threats we cannot see.
About one-third of Americans have been the victim of identity theft at some point in their lives. Most of those did not find out their identity was stolen until well after the crime had occurred.7
There are plenty of tools available to combat identify thieves, but few are quite as simple and effective as placing a security freeze, also known as a credit freeze, on your credit record.
Read on to learn how a couple of quick phone calls today can save you from a major headache in the future.
What is a Security Freeze?
A security freeze prevents creditors from accessing your credit reporting file. Because creditors typically will not offer a person credit if they cannot review your file, a security freeze is an action you can take to prevent an identity thief from opening a new credit card, loans, or services in your name without your permission.8
How Do I Freeze My Credit?
To place a freeze on your credit file, you will need to contact each of the three national credit reporting companies - Equifax, Experian, and TransUnion. The process is free, and it can be done over the phone or online.
Before you get started, it would be wise to review the types of personal information you may need to provide:
• Your full name, including middle initial and suffix, such as Jr., Sr. II, III
• Social Security Number
• Date of Birth
• Current address
• All addresses where you have lived during the past two years
• Email address
• A copy of a government-issued identification card, such as a driver's license or state ID card, etc.
• A copy of a utility bill, bank or insurance statement, etc.
Equifax - (800) 685-1111
Experian - (888) 397-3742
Transunion - (888) 909-8872
When you request a security freeze, you will be given a personal identification number (PIN) or password from the credit reporting company. Be sure to store that information in a safe and secure place.
What If I Actually Am Applying For Credit?
Perhaps you are purchasing a new car or home and need your credit report available for your lender. Don't worry, there is not a bunch of red tape to get through in order to make that information available to the right people.
You can choose to have your security freeze removed, or even provide dates for a temporary lift on your credit freeze by contacting each company and providing the PIN or password you had received when you first placed the freeze. You should have your credit freeze lifted within the hour.9
Can I Protect My Kid's Credit?
Federal law does allow guardians to request a security freeze for "protected consumers" under the age of 16.9 It's never too early to protect you kids against identity theft!
Gratitude Journaling Guided Practice
Do you want to feel inspired in your practice?
Are you stuck in a funk and want to be more optimistic?
Are you in need of an immediate 10% increase in happiness?
Join Stacey for a short, guided gratitude journaling training session to improve the quality of your life.
When: Thursday, May 19
Time: 12:00 to 12:30 CST
Who: This event is open to all - clients and others!