Private Client Group

May 23rd, 2022

Silver Linings in this Volatile Market

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With all the recent headlines surrounding the current state of the market and increased volatility, we are taking a deeper dive into key factors that we believe investors should keep an eye on, such as:

Data Points to Remember in a Crazy Market – The U.S. stock market produced some big swings this week, with selling pressure largely attributed to inflation concerns (again) and earnings miss by some major retailers. The retailers reported higher sales but also higher costs, which in our view is not a bad place to be if demand remains firm and inflation pressures ease with time. Regardless, stocks were choppy throughout the week, so we were reminded of two data points that may help put things in perspective. First, we think it is important for investors to note that since 2002, over 85% of the best days in the market occurred after the worst days, which underscores the importance of not making any sudden moves in response to a big down day. The second point is to remember what could happen if an investor tries to time the market and ends up missing some of the best days. Over the 20-year period from January 1, 2002, to December 31, 2021, the S&P 500 index delivered a stout annualized return of 9.52%. However, if an investor missed just the best 10 performance days – which again, often happens in close proximity to the bad days – the annualized return would be cut nearly in half, to 5.33%. An equity investor that spends way too much time on the sidelines and missed the 30 best days would have posted a 0.43% annualized return, which would not keep up with inflation.1

7 Secrets of Building an Effective Retirement Portfolio in a Volatile Market

Creating the ultimate retirement portfolio, especially during a volatile market, is not an easy task.  To build a portfolio that can potentially reach your goals, you must put time and effort into defining your investing objectives, determining your asset allocation, and managing your investments over time. To help you understand how to do this in a volatile market, check out our free guide. You’ll learn the secrets of successful retirement portfolios, including the right way to set your goals and retirement needs, as well as the key basics of disciplined investing, based on our decades of experience.

If you have $500,000+ to invest, get our free 7 Secrets to Building the Ultimate DIY Retirement Portfolio2 guide today.

The U.S. Consumer, Once Again, Remains Largely Undeterred – Elevated inflation remains an issue in the U.S. and around the world, but it is not deterring the U.S. consumer from getting out and spending. In April, retail sales rose a healthy 0.9% month-over-month, which follows a March retail sales number that was revised sharply higher by the U.S. Commerce Department. April’s read-out marks the fourth consecutive month that the U.S. consumer increased spending at stores, in restaurants and bars, and online. To be fair, the retail sales figure does not account for inflation, so higher levels of spending can also reflect higher prices consumers are paying. But it’s also true that there are little to no signs of retrenchment – in April, consumers spent more at restaurants, bars, and for cars, furniture, clothing, and electronics. Americans pulled back on spending on gasoline, but not much else. The shift to spending on goods versus services also appears to be continuing, which could relieve inflationary pressures going forward. Spending at food services and bars is up 19.8% from this time last year and jumped 2% from March to April. Consumers are still spending more on goods for now, but the goods vs. services spending equilibrium is now just a few percentage points away from where it was pre-pandemic.3

Economic Data in China Shows Pronounced Weakness in April – In our view, much of the recent market volatility can be attributed to a growth slowdown in China that took place in April and likely continued into May. China’s government officials have doubled down on stamping out all Covid-19 infections, and as we know from the experience with lockdowns in 2020, economic growth can take a serious hit when businesses shutter and people stay home. In China, retail sales fell 11.1% year-over-year in April, marking the biggest monthly decline since global lockdowns in March 2020. Industrial production also declined by 2.9% for the month, fixed-asset investment fell by nearly 3% from the previous quarter, and China’s urban unemployment rate rose to 6.1%. The question for markets now is whether China is in the process of adding more restrictions or in the process of removing them. Shanghai is scheduled to fully reopen on June 1, but much uncertainty remains over whether some other major hub in China will be next. It’s a factor to watch closely.4

Building a Retirement Plan That Can Withstand Any Market – Do you know that there are additional steps you can take to help build an ultimate retirement portfolio that meets your financial goals? Especially during this time of extreme volatility and recession fears, I recommend reading our guide, 7 Secrets to Building the Ultimate DIY Retirement Portfolio.5 This guide will show you how to create a retirement investment plan that can withstand any market—and potentially help you achieve your goals.

If you have $500,000 or more to invest, get this guide to learn our ideas on the step-by-step process of building and maintaining a retirement portfolio that will potentially help you reach your goals and enjoy a secure retirement.

Disclosure

1 J.P. Morgan. Guide to Retirement. 2022. https://am.jpmorgan.com/us/en/asset-management/adv/insights/retirement-insights/guide-to-retirement/?gclid=Cj0KCQjwspKUBhCvARIsAB2IYutVQ9YB2beqnkv0o5_WQxRTg367M4scHeLk5OBdUsLp-D4DOxkLjtYaAmUDEALw_wcB&gclsrc=aw.ds

2 ZIM may amend or rescind the guide “How to Build Your Ultimate Retirement Portfolio” for any reason and at ZIM’s discretion.

3 Wall Street Journal. May 17, 2022. https://www.wsj.com/articles/u-s-consumers-are-almost-too-healthy-11652803246?mod=djemRTE_h

4 Wall Street Journal. May 16, 2022. https://www.wsj.com/articles/chinas-economic-distress-deepens-as-lockdowns-drag-on-11652703162

5 ZIM may amend or rescind the guide “How to Build Your Ultimate Retirement Portfolio” for any reason and at ZIM’s discretion.

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.
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