Not quite there yet

Stock Market Sell-Off Likely to Continue

The S&P 500 is down about 18% year to date. Are we at the bottom of this market correction?

Unfortunately the signs are pointing to no. Every week we seem to get more bad news. Just today Snapchat who reported earnings only a month ago says they will be missing projected financial targets for Q2 of this year. This sent the stock crashing 31% in after-hours trading. The stock is now 81% below its all time high.

Other social media companies reacted to the news and fell as well, unsurprisingly. 😅 Meta (Facebook) dropped 7%.  Pinterest fell 12%. And Twitter is down about 4% after the $SNAP news broke.

As the management team of Snapchat explained, the economy is slowing down more quickly than they expected. This seems to be the overall narrative for the last 2 months. We have entire cities in China pretty much on lockdown. Real estate developers defaulting on their loans. Energy prices, an input cost to many businesses, are still very high. Stimulus savings have run out. Consumers are spending less.

A Slowing Economy

I think things will get worse before they get better. The next set of news we’ll likely see over the next couple of weeks could reveal some problems in the labour market. Job cuts are coming. Real estate prices will fall in the United States. People will be laid off. GDP will likely shrink in Q2.

Where is safety? Cash. If you have it, you can invest when there’s panic in the streets.

Looking at the charts, I would expect the Nasdaq to bottom around 11,000, and the S&P 500 to reach 3,600. So the good news is the worst of the market correction should be over. We’ll likely see another 5% to 10% decline in the market indexes from here. But I don’t expect further decline after that. 🙂

But all this is simply my own personal opinion. I don’t think we’ll see a massive 50% crash like in 2008/2009. The existence of the financial markets was in jeopardy during the great financial crisis. The current problems in 2022 don’t feel as bad by comparison. 🙂

A ~30% drawdown for the S&P 500, and a ~35% drop for the Nasdaq is the most likely case for now. And we are not far from that being a reality.

I don’t have immediate plans to buy or sell anything. My portfolio is down over $100K year to date. I’m going to wait until I see signs of a market bottom, and then slowly add to my existing positions or buy new high quality companies that are looking cheap. Here are some, but not all names on my shopping list. 🙂

• Alphabet (GOOG)
• RH (RH)
• Block (SQ)
• Amazon (AMZN)
• BlackRock (BLK)
• Shopify (SHOP)

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Random Useless Fact:

A year can make a big difference.