Why Stocks Dropped Again (It’s Not Actual News)

On May 10, 2022

Yesterday’s decline now has the S&P 500 down nearly 10% in a week and the pain inflicted by these losses is real and intense. The relentless declines are unsettling, we understand that, and we want you to know that we are invested right alongside you.

 It’s times like this that you must remember your time horizon and long-term goals. Imagine you’re on a ship being tossed around in a storm. If you focus on each wave, you’ll get seasick quickly…so instead, fix your eyes on the horizon. If your time horizon is longer than the short term, it’s important to remember that in the end facts do drive the market, and facts were not behind Monday’s declines (or Thursday’s or Friday’s). Momentum, fear and forced selling were behind it, as the declines themselves are now the single biggest negative for the market in the short term.

Despite the selling, however, the facts remain that yesterday, on balance, was slightly positive as Fed Fund futures reduced the amount of hikes expected in 2022 by 25 bps.

 Bottom line, as we demonstrate in the Market Multiple Table, the market has moved beyond the current reality (which isn’t great but it’s not a crisis or guaranteed recession either) and is now pricing in a lot of bad news. Bottom line, I want to point out...