February 2, 2022

The Appetizer

“If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

Warren Buffet’s advice for anyone investing.

Now, on to the numbers. Drum roll, please …

• 6.9%: GDP growth in the fourth quarter of 2021; 5.7% for the full year.
• 5.26%: the S&P 500’s decline in January.
• 31.96: the CBOE Volatility Index (VIX) reading on January 26 – the most volatile day in markets since the GameStop short squeeze last January.
  
• 44 pounds: the weight of a curling stone at the Winter Olympics, which kick off this Friday in China.
• $36,568: the lifetime cost of owning a medium-sized dog.

Dig In
Market Volatility

Stocks always go up! Nope. Stocks experience a decline at some point every year. Evidence here.

Despite the decline to start the year, equity markets haven’t fallen much. From the start of 2020 through last month, the S&P 500 is up 44.5% and the Nasdaq 100 up 73.7%. We did some number-crunching and in the last 76 years, the S&P 500 had 73 monthly returns that were worse than what we saw last month. That means on average, there was a monthly return worse than 5.3% about once per year. So does that mean it will be smooth sailing until January 2023?

Well, not quite. Our brains and the markets don’t like uncertainty. Just think about all the scenarios in your mind when someone doesn’t respond to your text.

For markets, this year there are more questions than answers, at least to start. How many times will the Federal Reserve hike rates? Will prices keep rising? Can the economy grow on its own? When will omicron peak? Will Russia invade Ukraine?

We remain positive on stocks for 2022, but be ready for continued volatility.

Weekly Specials

The latest omicron wave caused 9 million people – nearly 6% of the workforce – to call in sick during early January. Let’s hope that a COVID test doesn’t decide the Super Bowl.

The first rule of Fight Club is … whatever the Chinese Communist Party says. Rather than witnessing the chaos of skyscrapers exploding in the climatic final scene, the Tencent Video cut of Fight Club in China ends with text on a black screen announcing that the police won. Huh?

Oops. A 4-ton chunk of a SpaceX rocket that launched in 2015 is expected to crash into the moon on March 4, leaving behind a 65-foot crater. The incident highlights the growing problem of space trash floating around Earth. Fortunately, our runaway friend, the Webb telescope, made it safely to its orbit.

Pencils down! The College Board announced that the SAT exam will shift to a digital format by 2024. They claim the new format will make the test more relevant even as colleges increasingly de-emphasize test scores.

The Dish

Company earnings season is like March Madness for investors. In the next few weeks, we’ll be giving you the highlights.

Through Friday, a third of the companies in the S &P 500 reported earnings. Of those that reported, 77% beat analyst estimates. Analysts expect earnings to grow 24.3% from last year.

Tesla delivered 308,600 electric vehicles in the fourth quarter, setting a new record. Elon Musk was back for this quarter’s conference call. He said that the Cybertruck is delayed until next year, a $25,000 car is not yet in the plans, and work is moving ahead on Tesla’s humanoid robot, nicknamed “Optimus Subprime.”

Apple reported sales of $124 billion in the fourth quarter, a company record. The biggest slice is still the iPhone with over $71 billion in revenue, growing 9% from last year.