Market corrections draw attention from everyone; speculators, investors, retail traders, and anyone else you can think of probably has an opinion on when the next market downturn will be and its overall economic impact. While we diligently watch the global markets, we want to highlight some statistics that are not as exciting as predicting the next crash but should help provide peace of mind and some healthy perspective.
The chart below details every major market correction greater than -7% since March 2009. It details how long it lasted, what the percentage decline was, and the most relevant reason for its occurrence. Many of these corrections were compounded by external market factors and global events that affected many other markets. We want to highlight that the average length for S&P corrections is 60 days with an average downturn of -13.18%. This is important because many investors may sell their positions at a loss out of fear, but the reality is that these downturns do not last as long as one may think. Our key takeaway is that it’s often better to ride out the volatility than to try and predict when the market will rise or fall.
Data from Charlie Belilo, Compound, and Refinitiv as of the close of business 1-21-22
Watching From the Sidelines May Cost You
While it is tempting to sit on the sidelines when markets get volatile and then reinvest when there are smoother waters, history has shown us that can be a very costly mistake. The chart below shows the impact to your returns if you miss the best 10, 20, 30 and 40 days over the last 20 years as of December 31st, 2019 in the SP 500.
It is human nature for investors to want to avoid market drawdowns in their portfolio by waiting out the volatility, but it is imperative to remain disciplined with your investment strategy to avoid severe impacts to your portfolio.
As The Great Resignation Proceeds, Employers Must Adapt or Be Left Behind
For many, 2021 will be remembered as the year of the great resignation. Skilled workers learned to leverage video conferencing and digital productivity tools to achieve their goals and produce productivity.
As 2022 continues to unfold, flexible work arrangements and remote jobs are becoming more mainstream. Many employers observe that dedicated workers will perform well or even outperform when they have more control over their schedules and workday. While there are not as many resignations predicted for this year, remote jobs are becoming more competitive as firms accommodate relocating workers and sourcing top talent across the globe.
Employers who want to attract the best candidates are adapting to the new workplace by contracting freelancers, allowing location independence, and offering bonuses to incentivize workers to join their ranks.
JP Morgan Anticipates Greener Pastures Ahead For 2022
As supply chains adapt and shipping bottlenecks ease, analysts at JP Morgan foresee an increase in overall productivity. According to their research, they “expect 2022 to be another year of above-trend growth, due to a buildup of household savings during the pandemic, replenishment of depleted inventories, and ongoing support from monetary policy.” However, many still believe that the labor markets will be constrained. Many workers are staying out of the workforce while the demand for skilled labor increases.
As many as 4 million to 5 million workers have yet to return to work, highlighting the immense potential for consumers seeking to progress in their careers.
Unlike other periods of widespread unemployment, the labor market is ripe for those seeking jobs. Almost 30% of small businesses plan to increase wages in the coming years to attract top talent. Finally, overall demand is near all-time highs thanks to Government stimulus and consumer saving habits. Since many workers have been at home for the last two years, they have amassed over $2.5 trillion in excess household savings. Excess savings coupled with a return to normal for the flow of retail goods indicates a positive trend for profitability and economic growth.
Sustainable Investing Continues to Trend, But How Does It Stack Against the Numbers?
Many companies and government organizations strive to excel while implementing sustainable practices. While the pandemic helped to modernize practices like shipping, supply chain solutions, and manufacturing, many net-zero goals are difficult to quantify. Eco-business believes that 2022 will see many standards and regulations introduced that will enable ESG and sustainability metrics to be measured accurately, which will help innovators focus on systems and technology that propel productivity and simultaneously help them meet their environmental targets.
Investors expect to see more electric-vehicle adoption and development, a return to nuclear energy focus, and renewable resources to increase access to healthy food and sustainable clothing.
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For the Month Ending 1/31/2022 (Cumulative Returns)1
Did You Know?
Groundhog’s day is a popular holiday with roots dating back to ancient Celtic and Pagan festivals, which has evolved into an American tradition for predicting the change of seasons. As the tradition crossed the Atlantic, people chose the Groundhog (also known as a Woodchuck) to replace the badger, which had formerly been responsible for predicting the transition to Spring.
- America’s first Groundhog’s Day celebration was on February 2, 1887, in Punxsutawney, Pennsylvania.
- The famous 1993 film ‘Groundhog’s Day’ starring Bill Murray was filmed in Woodstock, Illinois.
- This year, 2022, Punxsutawney Phil saw his shadow, which means we are in for six more weeks of winter, according to tradition.
Presented by the Investment Committee of Lake Street, an SEC Registered Investment Adviser
The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Diversification does not ensure a profit or guarantee against a loss. There is no assurance that any investment strategy will be successful. Investing involves risk and you may incur a profit or a loss.