Stock Market Sell-off Causes The Worst January Since 2009βThen What?οΌ
The major indexes finished green after a wild day of volatility. π’ The tech-heavy Nasdaq also pulled a monster comeback, closing +0.6% after it plunged more than 4% intraday. The S&P 500 gained 0.3% and the Russell 2000 jumped 2.3%.
SELLOFF Becomes a HOT Search Term
What Is a Sell-Off?
According to Investopedia "A sell-off occurs when a large volume of securities are sold in a short period of time, causing the price of a security to fall in rapid succession. As more shares are offered than buyers are willing to accept, the decline in price may accelerate as market psychology turns pessimistic."
Most investors in the stock market for many years may have recalled the bleak time in 2008 when they saw the declines in the past few days. That year, before the storm of the financial crisis hit, the S&P 500 fell more than 2% twice in its first 10 sessions.
In the first three weeks of 2022, the S&P 500 is down more than 7%, while the Nasdaq Composite is down more than 11%.
The graph below shows the stock market movement in January for all years since 2000. January 2022 is marked with a thick red line.
Can this help us estimate the direction of 2022?
One Analyst said, "From a valuation perspective, U.S. stocks in 2022 may look more like 2000 and 2008. Stocks were doing well that year and valuations were at cyclical highs, much like they were a month ago. The opposite was true in 2003 and 2009, when stocks experienced massive losses and valuations were near cyclical lows."
Even in 2003 and 2009, the arrival of the bull market was not smooth sailing. In 2003, the S&P 500 fell another 12% before bottoming, and in 2009 it fell 26%.
Now may be the time for value stocks to do well.
With market valuations still near all-time highs and the Federal Reserve tightening monetary policy, I'm inclined to think January's selloff is a bad start to the year so far. In such market conditions, companies with strong balance sheets, high profitability, and reasonable valuations will be more resilient.
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Sounds like a game [η¬ε]
No way to predict the mkt
For Short Term, have spare cash, Buy the Dip & Sell to make descent profit for the next 4Qs