The past few weeks have been a 🎢 roller coaster for the stock market, with significant fluctuations that may have caught your attention.
And since a few of you have reached out with questions, I thought it would be helpful to share some insights and guidance with everyone on how to navigate this period of heightened volatility.
UNDERSTANDING THE MARKET SWINGS
We’ve seen the S&P 500 experience both its BIGGEST daily gain and loss of 2024 within just a few days. This kind of volatility can be unnerving 😬, but it’s essential to understand that these dramatic swings are not uncommon in equity markets.
The sharp rise in the CBOE’s Volatility Index (VIX), often referred to as the “fear gauge,” indicates that uncertainty is high. The VIX measures market expectations of near-term volatility and tends to spike during periods of market turbulence, reflecting investors’ heightened concern.
Just check out the graph below from Yahoo! Finance:
While volatility often correlates with short-term market declines, it’s important to remember that these fluctuations are part of the investment JOURNEY! 🚗 💰
As the saying goes:
Volatility is the price you pay for equity market returns.
WHAT’S TRIGGERED THE RECENT MOVES?
A big part of what’s happening now is tied to the economy, interest rates, and the actions of the Federal Reserve (the USA’s central bank).
Recently, the USA jobs report for June came in weaker than expected, showing higher unemployment at 4.3% and fewer new jobs than economists had predicted.
This has 🧨 sparked concerns among some investors that the Fed might have kept interest rates too high for too long while battling inflation, potentially putting strain on the job market and raising the risk of a recession.
Additionally, there is the whole Japanese/Yen saga…
🥜 In a nutshell, professional investors had been taking advantage of low Japanese interest rates by borrowing yen cheaply to invest in higher-yielding assets, a strategy known as the CARRY TRADE.
However, when the yen strengthened recently on the back of the Bank of Japan unexpectedly raising interest rates, this strategy became less profitable, leading to a sudden exit from these investments and triggering widespread market sell-offs. ⬇️
WHY DIVERSIFICATION IS KEY NOW (and ALWAYS)
With all the recent market ups and downs, there’s been a lot of talk about how much of the market’s gains are tied to just a few big tech stocks, often called the “Magnificent Seven.”
This heavy reliance on a small group of companies (AAPL, MSFT, AMZN, GOOGL, META, NVDA, TSLA) can make the overall market more vulnerable to big swings when these stocks take a hit.
That’s where DIVERSIFICATION comes in—by spreading your investments across different areas, you can help reduce risk and bring more stability to your portfolio, especially during uncertain times.
👀 It might be a good time to take a fresh look at your portfolio and think about diversifying beyond just these tech giants.
That said….
I’m a big believer that tech is the future! That is my PERSONAL VIEW. I also have a VERY diversified portfolio which influences my view. So, while it’s smart to be cautious, we should also recognize the incredible power and potential these companies have AND the returns on our future portfolios.
STAY THE COURSE
It’s natural to feel anxious during periods of market instability, but as always, it’s crucial to keep a LONG-TERM perspective.
As I always tell my clients:
Do NOT let short-term nervousness impact your long-term goals!
This is PARTICULARLY important if you started investing in the stock market later in life and/or your investments have been too conservative in the past.
Sudden market moves—whether 🆙 or 🔽—are not necessarily indicators of future trends. Consider maintaining a SMART investment strategy and avoiding hasty decisions based on short-term market noise.
If you have any questions or want to discuss your financial goals and portfolio in more detail, I’m here to help!
My passion is understanding your goals, assessing your risk tolerance, and helping you build a portfolio that’s uniquely aligned with you—this is truly my superpower. 💪🏽
Just last week, I guided a client through this process, and she sent me the sweetest message afterward:
“I feel seen and safe with you. You make it all so easy for me to understand.” 💕
This is what I ❤️ to do—supporting my clients every step of the way. So, I’ll be right there with you, sharing your screen and guiding you through each trade. My aim is to help you make the most of your investment in our partnership!
➡️ Book a free 20-minute discovery session so we can explore how I can best support your financial journey!
Wishing you continued financial success and peace of mind.
XOXO,
Anna
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Anna Orenstein-Cardona is a Financial Coach and NFEC-Certified Financial Educator (CFEI) who empowers organizations, small-business owners, and individuals to grow their money knowledge in fun and creative ways. She worked on Wall Street and in the City of London for over two-decades, before launching her financial education and coaching business, Wear Your Money Crown®.
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