Weekly Commentary, May 12,2023,Capital Markets, Economy
VenkataRaghu K.
Registered Investment Advisor|Financial Planner|Financial Analyst|CPM?
The week ending May 12, 2023, has been volatile for markets. The debt ceiling crisis that is being mentioned in the news is taking a toll on trader psychology. A lot of daily, weekly traders and institutional investments profit from these daily, weekly fluctuations in the market. Their goal is to analyze the sentiment and constantly re-adjust strategy to profit from the short-term inefficiencies in the markets. It is easier for seasoned short-term players than it seems to benefit from these short-term swings. However, if you have a full-time job or run a small or large business, the time it takes to research and trade on these wild swings is generally unavailable. For this reason, it will help investors pick whether they want to run a sprint or marathon in the capital markets. Each method has different strategies and emotional requirements that could make or break a wealth plan.
The funds we track for data analysis have remained the same as the updates in the software happen monthly. I have to set up my Data Analysis dashboard for my following newsletter to provide a weekly update on these funds. Although I recommend long term thinking, it is helpful to keep a tab on what is going on in the short term so that long term adjustments can be made based on further analysis combined with market and economic indicators.
A ban on short sales has been discussed for a while since the collapse of major banks. However that seems unlikely from the recent SEC statements. Short selling has its advantages and disadvantages. It is usually more sophisisticated than regular trading of stocks. As such many institutional investors benefit from the strategy more than individual investors. The argument against short selling is that it creates misery for long-term investors as their holdings swing wildly while they are long, due to the activity of short sellers. Short selling capitalizes on emotions and rumors. Occasionally, if someone does their research well, it provides a convincing opportunity to bet against group think.
The prime rate is 8.25%. It has reached a peak that we have not seen in a while. The Credit card interest rates, adjustable mortgages, etc., are at highs that will affect the borrowing capacity and payability. This kind of interest rate environment shall dampen consumer sentiment. The data points out that there has been a slight decline in consumer sentiment over the last few weeks. The new car sales and construction starts must be analyzed to see how far it has decreased or remained the same.
Economy:
Capital Markets:
Stock Sectors:
Bond Markets:
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Hypothetical Model, Long Term/Short Term Metrics:
Insights:
Nearly every stock sector has posted a loss for the week. However, many sectors have been on a recovery path from 2022 losses. From a long-term wealth management perspective, these losses should not be disheartening. Several research articles have analyzed the markets over decades and proved that just missing a few days of growth by being out of the Stocks dramatically affects the final balance's size. For people whose time horizon is over five years, this might be a good opportunity. There is always that next question, what if the market goes down further next week/month? The simple answer is conservative sectors combined with long-term thinking now until bad news is behind us. That way, the growth can be captured while dollar cost averaging, irrespective of near-term ups and downs. The mantra is time in the market, not timing the market.
Contact:
Raghu Kumar Komari, CPM?, Candidate for CFP? Certification
www.iriswealthadvisory.com
Disclosures/Disclaimers:
The commentary is provided for educational purposes only. It shall not be considered Investment Advise, Financial Planning Advise, or a recommendation of specific funds. Fees and taxes are not included in any hypothetical model or fund analysis. Please do your due diligence.