Hey Insiders, Recently I've received many Twitter and Linkedin messages from readers asking what they should do given the current market volatility. Before jumping into today's newsletter, I want to provide a general overview of what is going on and how investors should behave. This is general advice based on common investment strategies. Before making any individual decisions, you should consult with your financial advisor, who is familiar with your personal strategies and financial situation. This January has so far been the worst since 2008. On Monday, the market entered a correction territory during intraday trading, although it bounced back in the last few hours of trading. For those unfamiliar with the term, "correction" means that the stock market is down more than 10% from its high. The S&P 500 experiences a correction approximately every second year. JP Morgan has tracked 21 corrections in the last 41 years. 66% of the time, there is a correction, stocks finish the year in the green, showing that selling is not the correct response to a sudden dip in prices for most investors. If anything, for many investors, this is an opportunity to buy at a heavily reduced price, expecting that the S&P 500 will recover in the coming months. The truth about the markets is that the most significant gains come from the quick recoveries that sometimes follow sudden losses. If you had been invested from December 2001 to December 2021 in the S&P500, you would have returned 9.2% on an annual average basis. If you missed the ten best trading days in those 20 years, you would have averaged just 5% returns annually, and if you missed the 30 best trading days in those 20 years, you would return 0%. The risk in selling is too high because if you miss one of these critical trading days, the cost of buying back into the market will be so high it can undo an entire year of gains. On average, it takes about four months to recover from a 10-20% correction in the market. It has averaged 14 months to recover from a 20-40% correction, and with limited data, in the three times the market has lost over 40%, they recovered in 5 years. In short, if you need money in the next 4-14 months, you have a decision to make right now about whether you want to risk a 20%+ correction and risk having to hold stocks or sell at a massive discount. Nobody is predicting a dramatic fall of 40%+, and it happens so infrequently that there is no way to prepare for it without taking irrational actions. If you are invested long-term or believe the market is already starting to bottom out, then hold, markets will recover in less than a year, and by this time next year, you are likely to see profits. |
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U.S. Markets Stock futures are up slightly overnight after another volatile trading session that saw all three major indexes finish in the red. - Microsoft shares are up in after-hours trading after the company beat earnings expectations and raised future guidance. During trading yesterday, the stock was down 2.7%, and right after closing the shares dipped as much as another 4%.
- The Fed will conclude its two-day meeting today and an announcement regarding future policy is expected at 2 pm ET.
- The current 10 Year U.S. Treasury yield is set at 1.77620%
| Dow Jones | 34,297.73 | -0.19% | | S&P 500 | 4,356.45 | -1.22% | | Nasdaq | 13,539.30 | -2.28% | | Russell 2000 | 2,004.03 | -1.45% | *Stock Market data as of the last closing bell. Data received directly from the references indexes through ICE Data Services. Do you not understand any of these figures? Check out our explainer.
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Canadian Markets Investors think there is a 70% chance that the Bank of Canada will raise interest rates today. - The prediction is that the benchmark interest rate will be raised from 0.25% to 0.5%, and this will be the first of six increases in the next 12 months.
- This course of action by the Bank of Canada would follow the path taken by the Bank of England and the Reserve Bank of New Zealand.
- As of the end of October, the Bank of Canada held 40% of all outstanding Canadian government bonds.
*Canadian stock prices are as of the last close. Data received directly from the references indexes through ICE Data Services
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European Markets European stocks were up as they continue to outperform the U.S. market in 2022. - Banks led the markets, adding 2.9% on a day that saw the Stoxx 600 rise 0.8%. Tech stocks performed worst, falling 0.8%.
- Ericsson was up 8% after beating Q4 2021 expectations due to high demand for 5G.
- Logitech was up 6% as the company beat Q4 2021 expectations and raised its 2022 outlook.
| Euro STOXX 50 | 4,078.26 | 0.59% | | UK (FTSE 100) | 7,371.46 | 1.02% | | Germany (DAX) | 15,123.87 | 0.75% | | France (CAC 40) | 6,837.96 | 0.74% | *European stock prices are as of 7 am ET. Data received directly from the references indexes through ICE Data Services.
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| Which market will preform best in 2022? | | | | | | |
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Commodities Oil was up again Tuesday, largely due to concerns about the escalation of tensions at the Russia-Ukraine border. - The geopolitical influences on the market allowed oil to rise significantly despite other commodities being relatively flat, an interest hike announcement expected today, and a decline in equities.
- Any potential conflict could lead to decreased oil production and transportation, tariffs on Russia that will limit oil exports, and increased demand for oil by countries involved in the conflict.
- One key prospect that could put downward pressure on crude prices would be a nuclear deal that could potentially allow Iran to export oil to the U.S.
| Oil (NYSEARCA:OIL) | 26.32 | 1.27% | | Gold (NYSEARCA:GLD) | 172.58 | 0.32% | | Silver (NYSEARCA:SLV) | 22.02 | -0.41% | | Corn (NYSEARCA:CORN) | 22.40 | 0.22% | | Lumber (NASDAQ:WOOD) | 87.55 | 0.03% | *Commodity prices are as of 7 am ET. Data from MarketWatch. To understand why investors track the prices of these commodities, click here.
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Currency Exchange Rates The Euro has hit a one-month low due to fears that Russia will try to invade Ukraine, which has prompted investors to leave the Euro for the U.S. Dollar. - The Russian Rouble is struggling after hitting a 14-month low earlier before increasing by 0.54% today, to 78.62 roubles per dollar.
- The U.S. Dollar's performance further shows its place as a safe haven currency. At a time when conflict may affect many nations, investors are choosing the U.S. Dollar above other alternatives.
- Expected upcoming announcements regarding interest rates from the Federal Reserve are also strengthening the U.S. Dollar.
| UK(GBP) | £0.74 | 0.33% | | Europe (EURO) | €0.88 | 0.32% | | Canada (Canadian Dollar) | $1.26 | 0.38% | | Japan (Yen) | ¥113.86 | 0.09% | *Exchange rates as of 7 am ET. Data from Morningstar Financial Research. To understand why we track these currencies and the differences between them, click here.
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Over the past few months, you have probably noticed some trends when we discuss currencies. For example, the U.S. Dollar is often referred to as a safe-haven currency, the Australian Dollar is considered a risk-on currency, and the Canadian Dollar is strongly tied to commodity prices (specifically, oil). Given this knowledge, let us know: | Which currency do you think will perform best in the next 6 months? | | | | | | | | | | |
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 |  | Liam Gill is a founder, lawyer and investor.
He previously founded Fumarii Technologies, which became a top 20 ranked cloud computing service (Yahoo Finance! 2019) valued at over $30M. He holds an LLB Laws (UK), MSc Management and Master of Laws and currently practices law at Zargar Lawyers + Business Strategists in Vancouver, Canada. In addition to his work at Inside and Zargar, he spends his time supporting founders and entrepreneurs, including offering free legal information and contract templates at Law4Startups.com and co-hosting the Inside Business Podcast with Mac the VC. Follow me on Twitter if you are interested in market information or startup advice!
|   | | Editor | Eduardo Garcia is a writer and editor based in New York. He is writing an illustrated book about climate change that will be published by Ten Speed Press, an imprint of Penguin Random House. Bylines in The New York Times, The Guardian, Slate, Scientific American, and others. In one of his previous lives, Eduardo worked as a Reuters correspondent in Latin America for nearly a decade. | |
Splinterlands is the world’s #1 most played blockchain game. Play Splinterlands for free today. | |
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