With choppiness creeping back into the markets after a strong uptrend to round out 2021, there is one question you should probably ask your financial advisor before January ends.
“I think the biggest question we are getting is how are you handling the volatility we are currently seeing in the markets,” ShoreHaven Wealth Partners founding partner Michael Durso said on Yahoo Finance Live.
Judging by the market action to kick off 2022, most traders are being caught asleep at the wheel.
After Wednesday’s rout in tech stocks following a hawkish set of Fed minutes, SunDial Capital Research notes that more than 38% of stocks trading on the Nasdaq are now down 50% from their 52-week highs. Some of the biggest losers in Wednesday’s session were momentum names that were among trader favorites in 2021, such as Salesforce, Roku and GameStop.
Sundial finds that only 13% of trading days since 1999 have seen more stocks on the Nasdaq cut in half.
“Valuations are at historical highs, companies are raising billions based on fairy dust, and the Fed is signaling a tightening cycle. All of these are scaring investors that we’re on the cusp of a repeat of 1999-2000,” says the Sundial research team.
The risk-off tone in the markets this week has also found its way to bitcoin despite proponents of the crypto often saying it’s a good hedge against stock market volatility.
Bitcoin prices are down 9% in the past few days — prices dropped below the $43,000 level briefly on Thursday.
Pros like Durso believe now is a good time to zero in on portfolio diversification ahead of what could be a rocky period for the markets.
“I think a lot of it comes down to portfolio fundamentals — building a diversified portfolio, making sure you are balancing your winners and losers, looking to different sectors of the markets that haven’t performed well,” Durso said. “Making sure you are looking toward the long-term will help you monitor and waver some of the volatility.”