Market Update: January 25, 2022 Understanding Market History Helps To Calm The Nerves

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

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Tom Vaughan:

Hello, everybody, welcome to Tuesday, the S&P 500 was down 1.2%. Today, I really think the markets waiting around for the Federal Reserve’s comments tomorrow, the meeting today, they meet tomorrow. And they come out and give their comments talk about what they see and what they might be doing very, very important events to the stock market, you will see this. So I think people kind of wait on the sidelines until we see what happens there. I would like to spend some time here talking just about the history of kind of downturns. The S&P 500 Right now, from its highest close to the close today is down 9.2%. And so, you know, how often does this happen and those types of things, one of the things that helps me tremendously during these downturns is kind of understanding the history and how they work in the past. So CNBC put out a great article today shows that since the end of World War 219 46, to now we’ve actually had 84, downturns of five to 10%, so happens more than once a year, we really haven’t had hardly any at all, in the last over three years. You know, we had a downturn in 2018, of course, we had the pandemic downturn. So I think we’ve forgotten how frequent these are at the recovery time on those five to 10% downturns is just one month on average, so not too bad. And then when you get to that kind of 10, to 20% downtrend range, which we could fall into, I do think we have some momentum to the downside here. Those have happened 29 times, still fairly frequently, since 1946. But the recovery times only four months, not too bad, on average. And that’s where the dividing line goes. Because when you get to that 20 to 40%, there’s only been nine of them, the recovery time is 14 months, and quite a bit longer. And then you get to 40%, you know, downturn or higher, there’s only been three of those, that’s a 58 month recovery time.

But the difference between kind of that zero to 20. And the 20 or more is that generally speaking, when the market has fallen more than 20% has been accompanied by an economic downturn. That is not what we’re having right now. The leading economic indicators went up again in December, earnings are pretty fantastic. 88% of the companies that have reported so far have beaten Wall Street’s expectations for those earnings, which is really fantastic markets still going down, even though earnings are going up, and the economy is going up. Usually, that kind of a buying signal to me as far as that goes, there’s just some negative sentiment that’s happening here, fear about what the fairies are, might do or might not do. You know, a lot of times, there’s different things that are going on, you know, in different people’s portfolios, and what have you. So you want to design portfolios that can handle that kind of zero to negative 20%, drops in stock market, so that you don’t have to do a lot of movement and those types of things, and how much in stock and bond and those diversification that you have in that portfolio. And then when we get into emotion like this, where the markets coming down economies coming up, I call that a sideways motion market until the economy starts to come down, or we get past 20%.

And essentially, what you want to do is you want to just keep rebalancing the portfolio to that timeframe, if the market gets past 20%. And especially if there’s some signs of economic weakness coming on at the same time, that’s when you probably want to get more defensive, just because again, the recovery times are one in 4%, for that kind of 510, plan to 20%, you know, downturns, and they get a lot longer after that. So you can kind of shorten your recovery times potentially, by getting a bit more defensive to get past that. So I thought those numbers were useful. There, you know, it helped me a lot to understand what’s going on, you know, with the markets is understanding the history of the market. So I always trying to help people to get better at their investing and how they feel about their investing. And I do think that’s a big important component is understand, you know, what’s happened in the past. As far as that goes, these types of downturns we’re having right now happened more than once a year since 1946. So, just kind of part of the process. markets still a great place to be, just have to be able to kind of ride through some of these. So look forward to seeing what’s going to happen tomorrow with the Federal Reserve’s, you know, meeting comments and what have you and I’ll talk to you and give you my analysis about those tomorrow. Thank you very much.

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
  • Riskalyze, Inc.
  • thinkpipes®
  • Right Capital
  • YCharts, Inc.