The Goldilocks market tide that has pushed all stocks higher seems to be coming to an end. Even though the stock market was reaching all-time highs at the end of 2021, underneath the surface, a lot of individual stocks were being shredded by a riptide. This signals the shifting landscape of the market, which can be evidenced by Utah-based tech companies.
What is happening in the market, and what should be done for portfolios?
Ever since COVID-19 began and the stock market crashed in March 2020, stocks have been on a tear, thanks to the enormous government stimulus. A rising tide lifts all boats. In the last few months, the stock market has stayed near new highs, but if you dig deeper, you see turmoil in the market.
As of January 25, 2022, nearly half of the members of the NASDAQ index had lost over half their value. Only the biggest names like Microsoft, Tesla, Facebook, Apple, Amazon, Netflix, and Alphabet (Google) have been holding up the U.S. stock market until recently.
Like many stocks, Utah-based, publicly-traded tech companies took off after the market crash in 2020, with most having significant gains. However, those stocks are now being hammered. They all peaked in 2021. The table shows how much they have gained since the bottom (3/20/2020) and how far they have fallen from their peaks (as of 1/26/2022).
Warren Buffet has famously said, “Only when the tide goes out do you discover who has been swimming naked.”
To be clear, the tide is going out, but I don’t think any of these companies are swimming naked. In fact, I have a lot of faith in our Utah companies and believe they will come back. They are currently caught in a market cycle that boomed and is now pulling back.
I have confidence in the overall stock market as well. Utah-based tech stocks are just a microcosm of what is happening in the overall stock market. The shift in the market is signaling that no longer will all boats rise.
For the next decade, you may not be able to invest the same and do as well as the last decade. Our gigantic U.S. government debt could cause a tide of higher inflation and possibly higher taxes as well.
Now more than ever, it is imperative to have an active manager that can make adjustments to the portfolios based on the current market tide. At Smedley Financial, we are fortunate to have our Chief Investment Strategist, James Derrick, Chartered Financial Analyst (CFA), to watch over the portfolios. Combining proactive investment management and holistic financial advice is a recipe that can help make the future brighter, no matter what the tide does.
Listen to a deep dive about Utah Tech and the stock market on the Power Up Wealth podcast.
Past performance does not guarantee future results. S&P 500 and the NASDAQ are indexes often used to represent the U.S. stock market. One cannot invest directly in an index. Smedley Financial Services, Inc.® is not affiliated with any of the companies mentioned in this article. The author owns stock in DOMO, Health Catalyst, HealthEquity, Instructure, Qualtrics, and Weave.
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