Strange things gettin’ stranger ??

We’re halfway through 2022 and already it’s been a year of strange things. As we navigated a global pandemic, investing was strange enough. But it’s been getting even weirder as the world tries to find its new ‘normal’. ??

And strange things are happening. Like the value of ‘conservative’ KiwiSaver funds appearing to go backwards faster than ‘growth’ focused funds as interest rates rise. Or like big retailers suddenly being stuck with waaayyyy too much stuff. Since we’ve flown from our pandemic nests, Walmart (WMT) and Target (TGT) have been left with ‘billions of dollars’ of excess inventory like air fryers, toasters and bedding. Or like the entire bizarreness of Elon Musk’s ongoing takeover tussle with Twitter (TWTR). Pass the popcorn. ??

Strange things are happening at Netflix (NFLX), too. The company has been bleeding subscribers since we swapped TV for the hi def resolution of the real-world. Now they’re spending an estimated US$30 million per episode on their fourth season of freaky teen sci-fi, Stranger Things, to try and win ’em back. The show has catapulted boomer icon Kate Bush’s ‘80s synth vibe ‘Running up that hill’ to the top of the charts again after almost 40 years. ?? Also the last time anyone saw inflation this freakishly high… coincidence?

Maybe the strangest of all has been the blockbuster surge in shares of DVD vending machine company Redbox Entertainment. ?? In what could be ‘the “dumbest” meme stock yet’, shares in Redbox Entertainment were recently trading hands for around US$12 each. Nothing wrong with that, except for the fact the company has agreed to be taken over by streaming company Chicken Soup For The Soul (CSSE) (yes, really!) for about US$0.69 per share in stock. That means that an investor buying one share of Redbox for $12, would receive the equivalent of just US$0.69 if the deal closes. Sometimes truth really is stranger than fiction. ??

Let’s talk about the bear in the room ??

Share markets have been feeling especially grizzly recently. In fact, the S&P 500 Vanguard ETF (VOO) has now fallen into what’s known as a ‘bear market’, dropping 20% from its recent peak and wiping out all of the gains made during 2021. Grrrrr. ?? Although 20% is a completely arbitrary number, calling it a bear market just sounds way cooler, and is a quick way to express that investing is no marmalade sandwich teddy bear’s picnic right now. ?? It’s not just called that in the US. The New Zealand NZX50 index has been in a bear market too, and we Kiwis craft beers, not bears!

So why’s the ‘bear market’ suddenly talk of the town? Share markets have been mauled as central banks, like the US Federal Reserve, push up interest rates to try slow charging inflation. It’s like Christopher Robin taking the honey pot away from Winnie the Pooh in the middle of his lunch. Oh bother. ??

There are all sorts of theories on where the name ‘bear market’ comes from. And lovable Pooh isn’t one of them. One theory is that the name bear market comes from the idea of bears retreating into hibernation to slumber through the winter chill. Crypto currencies have their own version, the dreaded ‘crypto winter’. ?? A bull market, on the other hand, is a market that rises because bulls charge forwards. Another theory is it’s named because bears attack down with their claws, while bulls attack by lifting with their horns and throwing up into the air.

An alternative way to think about a bear market could be thinking of it like a Briscoes sale, or a ‘buyers’ market’. Some share prices are lower in a bear market than in a bull market, so may present investing opportunities for investors who are sticking with their long-term investing plan. See? Smarter than the average bear. ??

100 years of shares ??

Investing in the US share markets feeling like a white knuckle ride lately? Maybe it's time to ditch the magnifying glass and zoom out. Sure, the ‘Great Crypto Grift’ may be unravelling. But volatility and bear markets in the US share markets is business as usual. Just like investing in crypto, investing in the share markets can trade on emotions, with people buying when shares are high, and selling when they’re low. But unlike the unregulated, mood-swinging teenaged crypto markets, investing in the share markets is owning a slice of real companies, along with their assets, people, products and services. Time for a short walk down memory lane? ??

From boom to bust, the Roaring Twenties ended with a bang in October 1929. The bottom fell out of the share markets following a decade of 250% highs fuelled by mum and dad investors borrowing to buy shares. By July 1932, the US share markets closed down 89% from its previous highest peak in September 1929. Dance forward 40 years to the era of summer love, and doing more than a disco dip were the share markets, which were tripping. Hemlines dropped from mini to midi and share markets followed suit, plunging 48.2%. ?? By the 1980s, as hair got more air, the only thing not jazzercising were the share markets, dropping 27% between July 1981 and November 1982.?

Oops, we did it again… While Y2K didn’t take down civilisation, in March 2000 the dotcom bubble burst and the markets tumbled 36%. ???? Roll onto 2008, and the markets fell faster than Britney’s freedom, dropping sharply, at nearly 52% between October and November. More than a decade later, following the ‘short-lived’ Coronavirus Crash of 2020 when markets fell nearly 34%, investors experienced an investing ‘bonanza’, which today has fallen back to ground, around 21%, with the S&P 500 index today sitting higher than pre-pandemic levels.

So… lessons learned from 100 years of the share markets? Get familiar with your risk tolerance, don’t mix emotions with markets, plan for when you need to access investments, and step back and take in the whole NFT, not just a few pixels. ???

We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.