If you’re a financial advisor or fund manager and you didn’t go down 20% last year, you basically win. The S&P put him in a 20% bear market and the Nasdaq plunged almost 40%. Fixed income as an asset class he fell double digits. International equities have outperformed U.S. equities and, while not falling as much, are still down significantly. Excluding Turkey, which inexplicably doubled last year, the TUR ETF is up 99% in 2022.
I’ll Google it to find out why, but I don’t think so. There may be no reason at all.
The Dow Jones Industrial Average is down less than 10% thanks to greater weighting in energy stocks, but nobody owns the Dow Jones like people own the S&P 500 . He has $356 billion invested in the SPY ETF and hundreds of giant ETFs and mutual funds track it in the index. DIA – the Dow Jones version of SPY – has less than a tenth of his AUM ($29 billion) despite having been around for as long.
Anyway, the silver lining for this bear market is that we need to show off all the custom indexing and daily algorithmic tax loss harvesting capabilities we’ve been doing. There are also benefits to implementing tactical strategies in deferred tax accounts. Plus, we raised tons of money from new clients in this turmoil without a good advisor or a sound financial plan or a clue on how to derisk their portfolio. Not that we’re doing it, but we’re making sure that the bear market pays off in the process of fading. And it’s great to have positive and productive action to take the blood red tape, this is already his 7th bear market in my career. We know how to get through these things and what to do in them.
So all things considered, this wasn’t fun, but it will all work out in the end. Always so.
As I’ve been thinking about the hierarchy of people truly affected by the events (and price swings) of 2022, I’d put tech startup employees at the top of my list.
The average startup worker has probably received a lot of compensation (and daily motivation) in the last few years in the form of shares and stock options. In some cases, they even pay taxes upfront so you don’t have to worry about profits later. For this group of people staring at piles of worthless or near-worthless stock in thousands of companies, it was a terrifying experience. Layoffs won’t stop until the funding markets for venture his equity become more permissive, and won’t be for the foreseeable future. Capital went from cheap (or free) to very expensive. There is currently no appetite for this kind of risk. If the greatest company on the planet is on the verge of losing half of its market cap (Apple seems to be on its way at this point), why on earth is there demand for stock in pre-earnings whiteboard ideas? Uka business?
Remember when you were like, “Oh, you have a slide deck and a former Google employee, here’s $80 million in seed capital”? Seedless. Stay away from my window
Young people flocking to this kind of enterprise will feel this uncertainty the most. Layoffs are just beginning. Next is window down. This is when a company is hopelessly unprofitable, unlikely to raise money, and the only responsible option is to shut down. Return what was left out of the bank to the investor and leave the keys. It will take years for this process to cleanse the ecosystem of excess and establish the next generation. Those who could hold out until then either came from family money or were already beneficiaries of an exit or two from previous cycles. you know who they are They have numbers seven in the bank and are willing to spend time polluting Twitter with threads about hard things about hard things and Clay Christensen’s hard-to-remember quotes. , preaching about Ukraine until the Federal Reserve relents and the gold tap is turned on again. Mortimer is back!
But the workers are kind of insane right now. They probably didn’t cash out anything or take risks off the table like the founders. They had to put everything in the black and stay there while they waited for news of their next funding round. The news never came. And even in the economy with the tightest labor market ever, there is nowhere to go. Tech, media and telecom giants are all freezing or laying off employees.
Next to startup workers, mortgage brokers and realtors are the ones I feel most sorry for. They were on one of the most exciting bubbles of activity and action the housing market has ever seen. In just 20 months he has 20 years of upcycling all packed into it. My favorite local realtor started filming me trying on Gucci belts in the mirror. And post.
2020 and 2021 may have been the best years ever for the housing industry. House prices have risen 40% since he finally peaked in June 2022. Prices need to be lowered further to match current rents. Existing home sales are already bottoming out. The seller has nowhere to go and does not want to re-borrow at 6.5%. Buyers cannot justify a significant increase in borrowing costs. Contractors are able to sell new homes because their inventory is so tight, but the profit on the cost of building new homes is not exceptional. The market quickly froze. Refinancing takes place. Demand for mortgages is falling off a cliff. Transaction is gone. This spring it will get worse. The comps will be ridiculously bad compared to last spring.
FirstTrust’s Brian Wesbury and Robert Stein write about the housing market.
The real impact of interest rate changes is evident in the existing domestic market. Sales in January 2021 reached 6.65 million annually, the fastest pace since 2006. Meanwhile, the decline in pending home sales (pre-owned home contracts) in November points to another decline in pre-owned home sales in December.
There are two big problems for existing homebuyers. The first is that mortgage interest rates are so high that monthly payments increase significantly. Assuming a 20% down payment, rising mortgage rates and home prices after December 2021 equates to a 52% increase in monthly payments on new his 30-year mortgages for median existing homes. .
you can get the rest of them Click here for housing commentary.
So if you know a startup employee, be polite and offer to circulate their resumes. And if you know any residential realtors who weren’t prepared for the sudden change in the landscape in 2021, hug them. If you know a mortgage broker, cross across the street when you see them coming. No eye contact. Let me pass by and say in a low, reverent tone, “There I go, if it be not for the grace of God.”
It’s a tough environment for most people right now. Remember that it can always get worse.
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