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Weekly Market Recap – 12/20

60 Second Market Review

What happened?

  • Getting used to the zig and the zag yet? Markets went down this week, but it might not be because of Omicron. Hint: The Federal Reserve did something this week.
  • Markets have had major crashes more than you think – and recovered to all-time highs every single time. The urge to sell is often the most at the worst time.

Things to be aware of…

  • Turning your side gig into your full-time gig
  • Want to double your wealth? Forbes says those with a plan have double the wealth than those without one. Get your financial plan today.

The Details

What happened? 

Getting used to the zig and the zag yet? Markets went down this week, but it might not be because of Omicron. Hint: The Federal Reserve did something this week.

Source: Ycharts


Actionable Items for You:

  • Markets sold off this week as volatility continues to be the name of the game for December.
  • It might be more related to what the Federal Reserve is doing than Covid-19 – although both do not help. Don’t stress too much – the S&P 500 is still positive in December.

Where is that Santa Rally? Markets sold off this week to the tune of 1.7% to almost 3%, depending on which major index you are looking at. And just like you, we’re starting to get some dizziness from all the whipsawing of the markets in December. 

What was the cause this week? A few things working together, or so it seems. The Omicron variant of Covid-19 appears to be taking over, now in 89 countries according to the WHO (and counting). Governments are responding with local tightening of restrictions, cancellations of holiday plans including New Year’s Eve parties, and it’s starting to feel a lot like March 2020 again. That, and inflation is running rampant, causing concern for policymakers – including the Federal Reserve. 

Speaking of which, that might be the reason we’re seeing increased volatility lately. The Federal Reserve had a major pivot this week, speeding up its monetary tightening by forecasting more interest rate hikes next year, and aggressively slowing down their bond-buying moves (that provides liquidity to banks, spurring activity in the economy). 

Why is that such a big deal? Have to raise rates eventually, right?

Well, historically, markets have not done super well when interest rates are being hiked – with a caveat. It’s when the Federal Reserve hikes interest rates too fast, or too high, that stocks tend to pull back.

Why does that happen?

Raising interest rates increases the cost for companies. Think of it as a mortgage – if your interest rate is higher, you’re going to have a harder time affording that monthly payment. It’s the same for companies – they borrow money to start a business, pay their employees, or expand operations. If it costs more for them to borrow, they don’t make as much money. When you don’t make as much money, your company isn’t worth as much – making the stock drop. 

The reason tech stocks and the Nasdaq index (which is heavy on tech companies) drop more, is the more you are a growth company, the more your earnings are expected in the future. Future earnings are discounted more, so a small hike in interest rates can cause a larger effect on future earnings. 

Let’s not get too worried, though. The S&P 500 is still up 1.2% for December, and that’s the type of investment you should really be in. 

Want to know how we strategize your investment portfolio long-term? Feel free to set up a time to chat

Markets have had major crashes more than you think – and recovered to all-time highs every single time. The urge to sell is often the most at the worst time. 

Source: Investopedia

Actionable Items for You:

  • There have been several market crashes in history, and they all have one thing in common: new all-time highs were made after them.

Time for a stock crash history lesson, for those worried about markets. Market crashes are not new, in fact, here are a few major ones:

In 2020: -34%
n 2008: -56%
In 2000: -49%
In 1990: -20%
In 1987: -34%
In 1980: -27%
In 1973: -48%

Rough. If you invested at the peak before any of those selloffs, you probably wouldn’t be too happy. And many market commentaries say we’re on the precipice of another one. 

Even we say there will be another one. Because historically there always has been at some point. 

Do you know what all of those crashes have in common, though? 

They were all followed, at some point, by new all-time highs in the markets. That’s right, a recovery past their peaks and to new ones. 2020 is the most recent example in history, but it has happened several times before.

So be patient, stick with your strategy, and invest long-term and you will be ok. Don’t worry too much about today’s market worries, as there will always be something causing concern, and more often than not the markets simply ignore it and push higher.

And if it doesn’t, don’t panic. Crashes happen, but they have all been followed by new market highs (eventually). 

Let’s get you started on your financial future. Feel free to set up a time to chat.

Things to be aware of…

Turning your side gig into your full-time gig

Actionable Items for You:

  • Going from side-gig to full-time gig? Make sure you take care of some administration before you take the plunge. 
  • When you leave your full-time job, you might need to get your own health and life insurance. Cover all of your options ahead of time. In addition, keep those retirement savings going.  

So you are thinking of taking the leap and making your side gig your full-time gig. Congrats! Of course, it can be difficult to make this jump and it is extremely hard to find the right time, especially if you have a family or more people counting on you. 

Here are some signs you are ready to make the change:

  • You enjoy your side gig more than your 9-5.
  • Your side gig is so busy it feels like you have two full-time jobs.
  • You can reasonably live on what your business is making right now.

That’s a great start. However, make sure you consider a few things before leaving your day job. Once you’re on your own, you’re going to have to replace those employer benefits, and some of them are extremely important. Here’s a quick checklist:

  • Health Insurance: If you are married, maybe you can be added to your spouse’s employer plan. Single? Look into individual plan options (we can help with both of these).
  • Life Insurance: Is your employer’s policy portable? Might be a good option. If not, get some term life insurance quotes to replace the coverage you get through your employer. (again… we can help you with this!)
  • Retirement Savings: You have to keep your future self’s retirement on track. Keep up your contributions by opening a traditional or Roth IRA, depending on your situation. 

Now that that’s all done, a couple of things might help you work smarter, not harder, with your side-gig-turned-full-time-gig. 

Look for an assistant, or invest in a way to automate your social media. Hire a freelancer for some tasks you can outsource. If you want to level up the business, the only way is to free up your time for more important tasks.

Leaving your full-time job to be a business owner can be challenging.  Make sure you are up to the challenge by giving yourself time to let your side-gig grow while making a plan to ensure you have a successful transition. 

Do you want some help with covering your transition for your side-gig? We’re here to help. Schedule an Intro Call Today.

Want to help us? Share this with your friends and family. 

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