Your Financial Future: What is going on in the stock market?
What is going on in the stock market? After 2017, there was almost no volatility. This year has been like riding a roller coaster. This year started out fast and came to a sudden stop before the end of January. Since then, there have been a number of ups and downs.
Since the correction ended in 2008, one of the leading investment choices has been the FANG stocks, Facebook, Amazon, Netflix and Google now known as Alphabet. These stocks and a handful of others have produced large portions of the overall stock market gain. These high tech companies have dominated market growth.
Earlier this month, Facebook suffered the largest one day loss of value in the stock market history. It lost more than $100 billion in value. Any company that gives their product away for free must find a way to monetize operations. Facebook does this by selling ads. They know much more about you than you know. They monitor your likes and interests.
They will never disclose exactly who you are, but they group you with similar people and sell access to your group to advertisers. This is why you often see Facebook ads that are targeted to things that you like. Many people have said they like to see information about things they are interested in. Advertisers know their message is reaching their preferred audience.
Facebook’s recent collapse was caused by a reported weaker than expected revenue for the second quarter along with lower global daily activities use than had been anticipated. They have been running television ads promoting how they are protecting your information. Some of the steps they are taking will lower gross margins for a while. Since all of these FANG stocks and many others are so fully priced, bad new means big stock market losses. In Facebook’s case, $119 billion. Some people are asking if this is a buying opportunity. Only if it was worth the old value. It will probably take a long time to recover all this value.
The economy just reported the best jump in the GDP in four years. The economy grew 4.1 percent. There was strong growth in both business and consumer spending. There was also some export growth as soy beans and other commodities tried to ship before the tariffs went into place. The tariffs are a major question. Any country will put tariffs on our goods if we put them on their exports. This could increase inflation.
If inflation increases, the FED will raise interest rates quicker than the market expects. Controlling inflation is one of the FED’S major objectives. Rising interest rates will likely have an effect on market values.
Make sure that your portfolio reflects your risk tolerance and time frame of when you need the funds. Money needed in the next year or two probably should not be in the market. Stock selections will probably change from what they have been the last several years. This rotation is a normal part of the cycle. Market corrections are also part of the cycle and a bigger one will happen someday. Make sure your investments match your time frame.
Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.