Unquestionably, we have begun this year with a correction to the markets. The NASDAQ is down almost 9% as I am writing this. The DJIA is dropping as well. Despite a reasonably good 2021, the Financial Technology Sector was beaten down badly last year. The gains were very narrow, looking a bit like 2016 with just five companies making up about a third of the entire gain. Very concentrated portfolios with these companies thrived while diversified growth portfolios were not as effective. Plus, do I need to mention the Omicron variant of Covid-19 sweeping the country?
Growth & Technology
Complicating the Growth and Technology sectors, the 10-year Treasury Bond rates have gone from 1.32% to 1.78%, completing a total rise of 34%. This puts downward pressure on these two sectors. Of course, let’s not forget that this measurement was at a much higher rate previously, 2.53% in early 2017 and 3.15% in 2018. We know how positive performance has been for the last three years.
Does this mean it’s time to go to cash since both growth equities and bonds are feeling this downward pressure?
We don’t believe so. These corrections can last for several weeks or many months, and we view them as healthy for the long term.
We do believe, however, that these mini corrections present great buying opportunities for the companies and sectors that have quickly corrected. Today is no different.
Let me ask you two important questions:
1. Do you believe that the Technology sector of the U.S. is going to stop growing and inventing with higher interest rates?
2. Do you believe that the Biotech sector is done researching and innovating with higher interest rates?
In our view, we have seen that innovation has worked well in the past when interest rates were more than double than they are today, like just a few years ago. When the dust settles on this subject, the investor that stayed, invested, or reinvested will be rewarded in the long term. That certainly does not change the level of short-term investment pain we all feel, but it is something to look forward to.
Please call me anytime to discuss further. I am a cautious and meticulous buyer, and I am definitely not a seller. My experience with investors who have gone to cash is that they never sell at the high and rarely re-invest at the low, leaving gains on the table.
You can reach me at 925-314-8503 or [email protected].
We are continuously seeking new opportunities every day in our portfolios.
All my best,
Market volatility requires expert advice to navigate.
If you have any questions about your portfolio or know someone who could use my services, I’m only a phone call or email away.
Get in touch to start the conversation today.
All my best,
The Prosperity Difference
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DISCLAIMER: Prosperity Financial Group and Meet the Expert® with Elliot Kallen do not make specific investment recommendations on Meet the Expert® with Elliot Kallen or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of the Meet the Expert® with Elliot Kallen guests, and not necessarily of Elliot Kallen or Prosperity Financial Group.
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