The bears are running through the financial media, with the 5% drop in the S&P 500 over the last week. I saw a headline on Friday that one of JP Morgan’s top analysts was predicting a 20% stock market sell-off. Another Wall Street ‘expert’ – John Hussman – believes that we could see a 70% market crash, led by sky-high tech stocks.
The issues are many: sky-high corporate valuations, rapidly rising inflation, geopolitical instability (Russia/Ukraine), and record pandemic cases/concerns over new variants. This cartoon from Steve Breen at the San Diego Union Tribune captures it well …
If a deep downturn does come to fruition, I’m thinking we are in pretty solid shape with our plans. We are good with our cash buffer, continue to be debt-free, and just invested more $ in real estate with our new rental townhouse. Perhaps a market correction would also drive some change in Washington DC and improve our long-term prospects.
Where do you think the stock market will finish 2022?
Do you feel well positioned for the changes we are seeing?
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MrFireStation 
Investors need to look at stocks the same way they look at rental properties. If someone came along and made you a crazy lowball offer on the townhouse you just bought, you would laugh them away. Real estate investors are worried about the profit they make after paying their expenses. Eventually they may sell when an equally crazy person comes along and offers them a stupid high price.
Investing in dividend paying stocks that are growing with stable businesses underpinning the dividends are equivalent to the income you get from rental properties. Short term market pricing is the equivalent to a depressive Mr. Market making a low ball offer on your property. Other times, like up to the end of last year, Mr. Market was manic and willing to overpay for your stocks.
Mr. Market is probably going to be depressive this year and I expect this to continue until Dementia Joe gets the assisted living he clearly needs from the upcoming Red Tidal Wave.
A depressed Mr. Market will allow dividend reinvestment at higher yields, which drives up cash income faster. People need to pay more attention to the estimated annual income at the bottom of their statement and pay less attention to what Mr. Market is offering for your income stream AKA the current market value of your holdings.
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Mr Market had quite a manic day today, didn’t he? Dow down 1K and then finished up 100. Yikes!
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You know what didn’t jump around? My expected annual income.
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I think by the end of 2022 will be in recovery and growing. In the short-term this correction will continue.
I am still not FIRE’d so I see this an opportunity to pick up some stocks on sale.
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A FIRE sale.
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Ha ha ha! 🙂
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The market does seem to go through a half-dozen volatile, short-term ‘corrections’ for every big recessionary drop. Odds say you are right.
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Feeling well positioned… (roughly) 50% Real Estate, 20% Stocks, 20% Bonds, 2% Loans, 7% Cash/Other Short Term. Living solely on passive REI anyway, now five years into early retirement. Let it drop, I’ll just shift more cash/bonds to stocks. If the RE market falters, I’ll buy more RE.
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Real estate investors like you are living this inflationary period. Rising rents & principal appreciation.
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Chief, I never try to guess markets, beat markets, or time markets. I just try to “be” markets — in diversity of asset types, geographies and time periods. For rebalancing once a year back to allocation goals, we harvest winners and favor laggards with potential .
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I find my portfolio requires adjustments as life decisions need to be squared with changes in the economy/markets. It’s more than just rebalancing. Right now we have a big cash payment coming in from a real estate loan and are simultaneously buying the townhouse for our son. Additionally, we’ve jumped on the full MegaCorp pension – after living purely off of savings for s year. That had tax implications. Things will be less dynamic unless we decide to invest in a Florida place. Lots of decisions, but all fun ones!
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Jason Zweig “The Intelligent Investor “ column in today’s WSJ revisits what he wrote in 2014. Avoid market commentators and use recent volatility to reassess what kind of investor you are. Essentially if you thought something was a good investment is now on sale.
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That’s a good article: “Above all, what matters isn’t what the market does—but what you do in response.” I thought stocks were too expensive for the short term. Even after the early 2022 downturn, they still feel too high.
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However, I am seeing some great dividend increases lately. AXP just raised their dividend after taking two years off by 21%. CVX, which currently yields 4.28% just raised their dividend by 6%, which puts my expected return around 10.28%, plus capital gains.
The difference is back around 2010, I could buy stocks that had a greater than 4% current yield that were growing their dividend around 20% per year, which I projected to proceed a greater than 24% return. I can live on 10%.
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American Express & Chevron
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I am coaching up my three sons about navigating through the current volatile times and coming out a winner. Some of the best investments I have made looked good from a rational perspective and yet they made my stomach churn when I bought them. Let your rational self instead of your emotional self make your investment decisions. I am really proud of them holding the course.
They are also starting to see that their friends who were buying crypto and what is not cool are starting to have problems. They are learning what Warren Buffett meant when he said, “you find out who isn’t wearing a swimsuit when the tide goes out.”
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My son is holding the course too. And why shouldn’t he, at his age? He bought BTC at $80/coin, so he’s set up pretty well on that one!
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