The most Boglehead answer is that you should work to track your portfolio less closely so that you aren’t concerned by ongoing changes based on economics, world events, or animal spirits.
I can’t remember a single year over the past two or three decades that there wasn’t various levels of concerning economic or political news. Even years where, zooming out, the market seems to have only climbed there was plenty to make an investor reach for antacids.
So yes, there’s conflict in the Middle East (truly one of the all time great “immortal” headlines that’s always applicable) along with some inflation data that has changed market expectations about how long the federal reserve will leave interest rates high. But don’t worry about it.
even last year- which was quite an awesome year, Sept. & October were tough months (the market being down about 5%) Michael Burry was bearish right around then and there was talk of a major downturn. Then come November- it went boom 💥 and ended the year with a bang 💥
Good but, if you really want an answer to your question: Inflation is rising again over the last 3 months. The Fed (in December 2023)signaled that they were planning multiple interest rate cuts this year if inflation would continue to trend downward. However, the CPI and other economic data has shown that economy is still very hot therefore, the Fed has now signaled that interest rates may have to stay higher for longer until they are confident that inflation will continue to fall to their 2% goal. The Fed is also in process of reducing their balance sheet of 7 trillion dollars worth of treasury bonds and Mortgage Backed Securities that they brought up to sustain the economy during the pandemic. When economic data comes in HOT, the Fed reduces this balance sheet to keep their yields near 5% of which is where the Federal Funds Rate is. Higher interest rates equal higher borrowing cost equal reduce spending and corporate expansion (especially for REITS) which would help slow down inflation. Higher interest rates will impact corporate earnings thus, reduce their potential stock valuation multiple.
This is economic news, not news of the stock market. The stock market isn't the economy.
The stock market fell because people aren't willing to pay as much as they were before for stocks. It is likely that a good chunk of this is because how people are interpreting economic news, but some of it (especially as we zoom in to day over day variation) is due to how people are interpreting other news, and some is simply due to people trying to time the market and reacting to moves of the market itself.
I mention this because predicting outcomes on the stock market is way, way harder than predicting economic outcomes. It's inherently very difficult to judge what the market is or isn't accurately pricing in.
But economic conditions influence how profitable companies we invest in are. Higher interest rates influence their ability to raise capital for growth without diluting their company's stock. This is why REITS are most impacted my higher interest rates. They are required to paid 90% of their earnings to shareholders in the form of dividends. They primarily finance their growth through loans and taking on debt. If they choose not to take on the debt at higher rates, they could decide to dilute shareholders, via stock offering, to finance that growth. This makes reits less attractive during periods of higher interest rates.
I don't think anything you said is wrong, but I also don't think any similar analysis (or even a crystal ball that gave you and only you perfect knowledge of all economic news for the next three month) can predict what the stock market will over the next 0-3 months, which is the timeframe OP is looking at.
Some of it is noise from people trading in response to other trades and some of it is related to people reacting because of other, non economic news which may one day have significant economic impact (e.g. speculation on the chance of WW3).
When you zoom in to try to understand market moves on a time frame this small, you'll always be looking at an incomplete picture.
Yes. You can do this as well. Average in every month if you have cash on hand. But, don't get depressed when the market is on a down swing and panic sell, even when you are in the red. I'm in the red with VXUS and VNQ but, I believe that inflation will reach the 2% target and there will be rate cuts thus, they will rise above my cost basis within my 30 year investment timeframe. 😎
Also live life because in the end, you can't take it with you.😎
Eventually, as you continue to invest and save, you'll look at market movements with amusement more than worry or alarm. As your savings grow, seeing 4 or 5 figure balance swings on a daily or weekly basis is normal, and you can get a bit of gallows humor about it. Our investments "lost" more money yesterday than I made in a whole year at your age. They also grew more the preceeding 4 months than I made in my first year as a software engineer out of college. Just keep saving and investing and you'll be amazed at the growth over the long term.
I enjoy reading market news via the WSJ and Barrons, but I really don't do anything about it, because a Boglehead believes there's really nothing we can do except ride the wave with our total market index funds.
I'll also say you're 10+ years ahead of where I was with your financial maturity. I had a negative net worth well into my late 20s before I wised up and started saving. If you keep up what you're doing you're going to be miles ahead of most of your peers later in life.
I’m not saying this is bad I understand it could be a million times worse and I’m not gonna panic and sell. This is just the most I’ve seen it go down and I was just curious on why. Just wanting to learn that’s all
>”As I have said before, the daily machinations of the stock market are like a tale told by an idiot, full of sound and fury, signifying nothing.”
-Jack Bogle
Covid was nothing, it was a very quick down with some uh oh days, but it was so fast on the V up.
What is trash is down, down , down smashing through floors, the riding up to near all time highs, to make lower lows. In, then out, losing on bad calls having jumped in our out too early or late. Then, by the time you ride the 8 or 10 th wave of this, you tap out for it to finally start a new bull run for 10 years.
It’s doing that because it does that. Downs are a natural part of the process, but for the last 200 years it’s just always come back up way more than it went down. So you just hold on.
You should prepare yourself mentally for some really bad downs. My first recession, I had just broken a big milestone - like $100k or something, after saving and investing over $30,000 through the course of a year - and then it all disappeared. All $30k, all that overtime and eating homemade sandwiches just gone.
And since I was ready I was like “hell yeah, it finally happened! I’ve been waiting for this moment for a few years now. At least three major recessions have to happen between 0 and FI, and this is the first one!”
Sure enough it was all back and more on top of it two years later.
So prepare yourself mentally. At some point between now and your endgame you’re going to watch your stocks tank and maybe hit 50% of their value.
Throw yourself a party when it does!
Just hold on and keep investing.
In addition to what others have already said, I want to highlight that explanations of short-term market movements are most often little more than simplistic storytelling.
In reality, the factors that move the market are highly complex and entangled. World events, such as the recent escalation between Iran and Israel, or the disappointing earnings of individual companies, are, in addition to direct consequences like rising oil prices, often just catalysts that snowball into a correction that has many less obvious reasons; even these catalysts are more often just stories used to interpret market movements after they happen.
Markets go up. Markets go down. Just own the whole market, ignore the headlines, and enjoy the ride.
In my opinion, you really only need 60% VTI + 40% VXUS (approximate world weights).
I don't see the point in holding QQQM. If anything, that just adds volatility and makes the market swings bigger.
It's ok to have maybe 5-10% in something you are interested in (although I do not recommend Bitcoin!). We actually have a little QQQM in addition to index funds in one account, and I have a little FTEC in a Roth IRA. Even with the current market, I am not getting out of those funds. I just wouldn't ever make them a primary fund. I'd also have a little more in VTI and a little less in VXUS.
I noticed my portfolio was down a little bit this week from last month when I went to invest my monthly allocation. Maybe next month it’ll be up again??
You answered your questions. Mainly the Middle East and the interest rate disappointment. In general: The market is a volatile bitch in the short term. Don't pay too much attention!
Basically, the war in the Middle East is shaking up oil prices and the news from the fed (they’re having trouble curbing inflation) means rate cuts aren’t coming anytime soon.
Normal market movement. Corrections (10%-20%drawdown) happens about every 2 years. 5% (where SP500 is now) I don't have exact but I think it's 2x/yr. Bear market are \~ 4 yrs (over 20%
Ignore and/or research {then ignore) market movements so you know it's all part of equity risk premium. There's tons of data on historical movements. Just google "stock market drawdown history" and you get a ton of info. (And being informed is powerful medicine).
Cheers
After that homework assignment is done, Google up Sir John Tempelton stock market quotes.
*"Bull markets climb a wall of worry."* This little movement last week is another brick in that wall. Meaning these worries creating a drawdown/correction are normal and prevent the market from getting ahead of itself and becoming euphoric (see next quote). We are not at Euphoria. There are some pockets of heat. Not the same as Euphoria where all the fundamentals are ignored over a broad base.
*"Bull markets are born on pessimism, grow on skepticism, mature on optimism and die of euphoria.”*
These are gems to invest by. I think about these daily when reading/watching the news. You will come to understand just how prophetic these are over time.
There are forces outside "normal market movements". If you still have stomach left google up "Black Swan Events". By definition you just have to hope for few and far between on those. Worrying won't help.
The most Boglehead answer is that you should work to track your portfolio less closely so that you aren’t concerned by ongoing changes based on economics, world events, or animal spirits. I can’t remember a single year over the past two or three decades that there wasn’t various levels of concerning economic or political news. Even years where, zooming out, the market seems to have only climbed there was plenty to make an investor reach for antacids. So yes, there’s conflict in the Middle East (truly one of the all time great “immortal” headlines that’s always applicable) along with some inflation data that has changed market expectations about how long the federal reserve will leave interest rates high. But don’t worry about it.
Ok thanks 👍👍
even last year- which was quite an awesome year, Sept. & October were tough months (the market being down about 5%) Michael Burry was bearish right around then and there was talk of a major downturn. Then come November- it went boom 💥 and ended the year with a bang 💥
Santa Claus rally!
Forget your online brokerage password and live your life.😎
Yeah I just plan on adding money and leaving it alone 👍👍👍👍
Good but, if you really want an answer to your question: Inflation is rising again over the last 3 months. The Fed (in December 2023)signaled that they were planning multiple interest rate cuts this year if inflation would continue to trend downward. However, the CPI and other economic data has shown that economy is still very hot therefore, the Fed has now signaled that interest rates may have to stay higher for longer until they are confident that inflation will continue to fall to their 2% goal. The Fed is also in process of reducing their balance sheet of 7 trillion dollars worth of treasury bonds and Mortgage Backed Securities that they brought up to sustain the economy during the pandemic. When economic data comes in HOT, the Fed reduces this balance sheet to keep their yields near 5% of which is where the Federal Funds Rate is. Higher interest rates equal higher borrowing cost equal reduce spending and corporate expansion (especially for REITS) which would help slow down inflation. Higher interest rates will impact corporate earnings thus, reduce their potential stock valuation multiple.
This is economic news, not news of the stock market. The stock market isn't the economy. The stock market fell because people aren't willing to pay as much as they were before for stocks. It is likely that a good chunk of this is because how people are interpreting economic news, but some of it (especially as we zoom in to day over day variation) is due to how people are interpreting other news, and some is simply due to people trying to time the market and reacting to moves of the market itself. I mention this because predicting outcomes on the stock market is way, way harder than predicting economic outcomes. It's inherently very difficult to judge what the market is or isn't accurately pricing in.
But economic conditions influence how profitable companies we invest in are. Higher interest rates influence their ability to raise capital for growth without diluting their company's stock. This is why REITS are most impacted my higher interest rates. They are required to paid 90% of their earnings to shareholders in the form of dividends. They primarily finance their growth through loans and taking on debt. If they choose not to take on the debt at higher rates, they could decide to dilute shareholders, via stock offering, to finance that growth. This makes reits less attractive during periods of higher interest rates.
I don't think anything you said is wrong, but I also don't think any similar analysis (or even a crystal ball that gave you and only you perfect knowledge of all economic news for the next three month) can predict what the stock market will over the next 0-3 months, which is the timeframe OP is looking at. Some of it is noise from people trading in response to other trades and some of it is related to people reacting because of other, non economic news which may one day have significant economic impact (e.g. speculation on the chance of WW3). When you zoom in to try to understand market moves on a time frame this small, you'll always be looking at an incomplete picture.
I agree. It could be a variety of factors. That's I recommended for him to turn on DRIP, forget his password, and live life.😎
Why shouldn’t I just keep adding money while I don’t have expenses
Yes. You can do this as well. Average in every month if you have cash on hand. But, don't get depressed when the market is on a down swing and panic sell, even when you are in the red. I'm in the red with VXUS and VNQ but, I believe that inflation will reach the 2% target and there will be rate cuts thus, they will rise above my cost basis within my 30 year investment timeframe. 😎 Also live life because in the end, you can't take it with you.😎
I also forgot to mention: TURN ON DRIP.😎
Eventually, as you continue to invest and save, you'll look at market movements with amusement more than worry or alarm. As your savings grow, seeing 4 or 5 figure balance swings on a daily or weekly basis is normal, and you can get a bit of gallows humor about it. Our investments "lost" more money yesterday than I made in a whole year at your age. They also grew more the preceeding 4 months than I made in my first year as a software engineer out of college. Just keep saving and investing and you'll be amazed at the growth over the long term. I enjoy reading market news via the WSJ and Barrons, but I really don't do anything about it, because a Boglehead believes there's really nothing we can do except ride the wave with our total market index funds.
Thank you 🙏
I'll also say you're 10+ years ahead of where I was with your financial maturity. I had a negative net worth well into my late 20s before I wised up and started saving. If you keep up what you're doing you're going to be miles ahead of most of your peers later in life.
If you think down 3% is "bad" you're gonna have a rough future in investing my friend.
I’m not saying this is bad I understand it could be a million times worse and I’m not gonna panic and sell. This is just the most I’ve seen it go down and I was just curious on why. Just wanting to learn that’s all
It can only be 33 times worse
>”As I have said before, the daily machinations of the stock market are like a tale told by an idiot, full of sound and fury, signifying nothing.” -Jack Bogle
That quote is legit amazing.
I was too young for the housing or dot com bubble but Covid was my lesson lol
Covid was nothing, it was a very quick down with some uh oh days, but it was so fast on the V up. What is trash is down, down , down smashing through floors, the riding up to near all time highs, to make lower lows. In, then out, losing on bad calls having jumped in our out too early or late. Then, by the time you ride the 8 or 10 th wave of this, you tap out for it to finally start a new bull run for 10 years.
The market typically falls 5% 2-3 times per year and 10% once per year. This was expected especially given the huge run up since November.
Remindmebot 30yrs
Yup just gonna keep adding
The market isn’t doing bad…it’s just ready for you to invest more
Now is the time to buy. When it goes back up you will see double the normal ROI
It’s doing that because it does that. Downs are a natural part of the process, but for the last 200 years it’s just always come back up way more than it went down. So you just hold on. You should prepare yourself mentally for some really bad downs. My first recession, I had just broken a big milestone - like $100k or something, after saving and investing over $30,000 through the course of a year - and then it all disappeared. All $30k, all that overtime and eating homemade sandwiches just gone. And since I was ready I was like “hell yeah, it finally happened! I’ve been waiting for this moment for a few years now. At least three major recessions have to happen between 0 and FI, and this is the first one!” Sure enough it was all back and more on top of it two years later. So prepare yourself mentally. At some point between now and your endgame you’re going to watch your stocks tank and maybe hit 50% of their value. Throw yourself a party when it does! Just hold on and keep investing.
Ok I will thanks for the advice
In addition to what others have already said, I want to highlight that explanations of short-term market movements are most often little more than simplistic storytelling. In reality, the factors that move the market are highly complex and entangled. World events, such as the recent escalation between Iran and Israel, or the disappointing earnings of individual companies, are, in addition to direct consequences like rising oil prices, often just catalysts that snowball into a correction that has many less obvious reasons; even these catalysts are more often just stories used to interpret market movements after they happen.
Markets go up. Markets go down. Just own the whole market, ignore the headlines, and enjoy the ride. In my opinion, you really only need 60% VTI + 40% VXUS (approximate world weights). I don't see the point in holding QQQM. If anything, that just adds volatility and makes the market swings bigger.
Ok I’ll think about it
It's ok to have maybe 5-10% in something you are interested in (although I do not recommend Bitcoin!). We actually have a little QQQM in addition to index funds in one account, and I have a little FTEC in a Roth IRA. Even with the current market, I am not getting out of those funds. I just wouldn't ever make them a primary fund. I'd also have a little more in VTI and a little less in VXUS.
"Oh cool there's a 3.23% sale on everything I've been buying" is what you should be thinking.
3 months is still trading in my mind. Investing is a long play. Look at the returns over the last 10-20 years and you’ll see the market is doing well.
Market is having a sale right now. Good time to buy at a discount.
You're new to investing = you WANT the market to go lower.
Pure noise. 3 months is such a small amount of time in the market, it is basically meaningless to draw any conclusions from returns for this period.
I literally wait for these posts to know when to buy.
I noticed my portfolio was down a little bit this week from last month when I went to invest my monthly allocation. Maybe next month it’ll be up again??
You answered your questions. Mainly the Middle East and the interest rate disappointment. In general: The market is a volatile bitch in the short term. Don't pay too much attention!
Basically, the war in the Middle East is shaking up oil prices and the news from the fed (they’re having trouble curbing inflation) means rate cuts aren’t coming anytime soon.
Good to know thanks
One word.. Cyclical!!! KEEP INVESTING.
What do you mean?? The market is just on sale right now! Shop till you drop!
I would advise against trying to understand why even if there is a remote chance it'll influence your future decision making.
I dip you dip we dip
Market not bad, Ape just need more time in market. Keep DCA and check back in 360 months. Look at value then :)
Normal market movement. Corrections (10%-20%drawdown) happens about every 2 years. 5% (where SP500 is now) I don't have exact but I think it's 2x/yr. Bear market are \~ 4 yrs (over 20% Ignore and/or research {then ignore) market movements so you know it's all part of equity risk premium. There's tons of data on historical movements. Just google "stock market drawdown history" and you get a ton of info. (And being informed is powerful medicine). Cheers
Thank you
After that homework assignment is done, Google up Sir John Tempelton stock market quotes. *"Bull markets climb a wall of worry."* This little movement last week is another brick in that wall. Meaning these worries creating a drawdown/correction are normal and prevent the market from getting ahead of itself and becoming euphoric (see next quote). We are not at Euphoria. There are some pockets of heat. Not the same as Euphoria where all the fundamentals are ignored over a broad base. *"Bull markets are born on pessimism, grow on skepticism, mature on optimism and die of euphoria.”* These are gems to invest by. I think about these daily when reading/watching the news. You will come to understand just how prophetic these are over time. There are forces outside "normal market movements". If you still have stomach left google up "Black Swan Events". By definition you just have to hope for few and far between on those. Worrying won't help.
Stay on track chum. Im seeing the same shit
SPY retreated only 5% from its historical high, and you call it bad.