Relentless Selling
For many individual stocks, the post-pandemic gains have not only been negated, but share prices are now lower than pre-pandemic highs. The accommodative monetary policies, Covid related stimulus, asset purchases, and market liquidity are coming to an end. Now, raging inflation, impending interest rate hikes, Federal Reserve tapering, omicron ebb and flow, continued supply chain disruptions, and geopolitical issues have culminated into the current market swoon. The latest market weakness has been persistent over the past few months while being exacerbated in January and February to start 2022. A third of the Nasdaq 100 stocks are off at least 30% from their highs; half of the S&P 500 has fallen 15% or more while the median biotech stock has sold off by 60%. Taking a look at a composite of high-flying growth stocks using the Ark Innovation ETF (ARKK) as a proxy, this cohort is down 60% as well.
The recent multi-month sell-off from November 2021 through mid-February was met with heavy and vicious selling. Valuations have been decimated overall, and cold water has been thrown on investor enthusiasm, especially in the more speculative stocks in cloud software, SPACs, and recent IPOs. The tremendous selling volume has inflicted damage across the board, with whole swaths of the market auto-correlating into a downward spiral. Now many opportunities are presenting themselves as valuations have been greatly reduced. Being too bearish may prove ill-advised over the long term as we're witnessing the 2020 Covid-induced sell-off unfold all over once again. Portfolio balance is key in any environment and deploying the cash portion of one's portfolio during periods of moderating valuations is exactly where this cash can be advantageous. Cash can be used opportunistically for snapping up heavily discounted stocks of high-quality companies during periods of indiscriminate and heavy selling. Continue reading "Post-Pandemic Gains Negated - Don't Be Remiss"