So … Schwab’s money market rates are at 4.17% now. Did we mention that to you? Because if we haven’t it may be worth a discussion. On Monday, the S&P 500 suffered its worst day since 2022 and wiped out $1.4 trillion dollars of wealth in a single day1. As of yesterday, the S&P 500 was in correction territory, down 10%, since February 19th. This qualifies as the biggest drawdown since … you guessed it … 20222. Coincidentally, perhaps, we made our market call forecasting stock market volatility on February 20th due to the lowest yield for the S&P 500 in history. In that report we said in closing: “We’ve just sent someone up into the Crow’s Nest to look out for the lighthouse. So, hear us when we tell you that there’s a storm on the horizon and the rocks may be closer than you think …” It turns out those rocks were quite close indeed. We keep telling you that if you listen to us, we’ll change your financial world. Here’s a great example.
While 10% was the number for the S&P index, some stocks have been much harder hit YTD than that. As of Tuesday night, Apple was down 15%, Microsoft was down 18%, as was Meta. Google was down 21%. Nvidia was down 29%. (It gets worse). Microstrategy, which is a company focused on acquiring Bitcoin, is down 52% and Tesla is down 53%. With those big mega-cap stocks above skidding down the slope it’s amazing, frankly, that the index isn’t much further down the hill. The S&P 500 today stabilized a bit as the recurring inflation narrative has dominated the market alongside AI for the last 2 years and anything that reinforces the belief that interest rates must come down has generally helped the market.
This could be a buying opportunity for some. This could be an attempt to catch a falling knife for others. Today we did see some help arrive in the form of CPI data coming in under expectations, 2.8% year-over-year versus a 2.9% estimate3. These numbers are slightly down overall. Meanwhile the Atlanta Fed this week was talking recession possibilities with a forecast of 1st Quarter GDP at -2.8%4. So the data doesn’t look great. The 25% tariffs on Canada and possibly to come on other parts of the world may be temporarily inflation-causing until demand for those products adjusts to higher prices. But then there’s the possibility that earnings numbers for many foreign consumer discretionary companies, material companies and car companies could suffer as could American companies’ earnings if there are retaliatory tariffs. Don’t get us wrong – we love the idea of the External Revenue Service. Bring it on if it reduces everyone’s taxes. But just know there could be some temporary effects in the market to watch out for before the country gets where it’s trying to go.
We’ve made some adjustments this week in our Investment Committee to our Christian Values Income portfolio that’s currently yielding 4.1%. It’s a great place to earn some income while the market is down. We also have the Monthly Cashflow portfolio to create a more consistent income for you in retirement. In addition, there’s the idea of capitalizing on the 4.17% money market rate for those more risk averse. Everyone’s strategy is going to be a little different during market volatility due to age, income needs and risk tolerance, among other things. We don’t have a one-size fits all approach here. Call us to discuss what strategy is right for you during this volatility.
Here’s a quick quiz to sum up. It’s just one question.
Please finish the following sentence:
If you listen to us …
- you’ll come to appreciate wine. (Might possibly be true)
- you’ll be less likely to dunk us in the dunk tank in our next client social. (Probably true)
- you’ll be able to better tell your friends and family all about us (we’d really like this).
- we’ll change your financial world …
- all of the above
Sincerely,
The WTA Investment Committee
Sources:
1@TheKobeissiLetter
2@Charlie Bilello
3@LizAnnSonders
