Broad Market Outlook
It is hard to remember the start of the year as each trading day tends to blend in with the prior but it was a different time. We were nearly 2 years into a massive rally, where hitting new 52 week highs was expected instead of something to cheerish.
After making us fat and lazy for nearly 2 years, the market whipped us into shape this year as we shed the dead weight. Where the customary new all time highs were expected, it was flipped to new 52 week lows almost weekly.
From peak to the current bottom this year the market dropped 28% and currently sits down 21% on the year. Seems bleak, but there are plenty of positives.
One, you surived a bear market and as scary as novice investors make them out to be, was this year really all that scary? You probably were more bored then anything. Survied your first or second bear market, great job, made money this year in an bear market, amazing job!
This past year, I have shifted my overall advice to new members and have tried to get most of you to follow the same simple plan that consist of:
2 overall strategies:
Strategy 1 - Your larger accounts (401k, IRA, etc) to aim to match the market such as buying the Big Picture, buying the S&P 500 eqiulvment in ones 401k with the goal to buy the market daily no matter what.
Strategy 2 - Your smaller account you aim to beat the market by swing trading aiming to achieve alpha using marketing timing and the swing trading strategies we teach and follow.
By having these two strategies, you set up the simple market matching strategy and once it is set up, your day to day work is done other then increasing the weekly saving and then you are left with just one account to focus on and trade out of.
Now strategy 1 for most members might look something like this:
Where you might be down around 10 to 11% this year dollar cost averaging into the market. With the overall market down more then double at 20%, most members who followed this approach should start to see the benefits of buying consistently instead of trying to time the low. Frankly there are some members who are even up on the year, buying the broad market when its lost nearly 20%. Seems like a Snapple fact to some, but there are powers to be consistent in the market regardless of the overall narrative.
This is the time, where instead of asking yourself:
Did I beat the market this year? Or did I lose less then 20%?
The question becomes which strategy did better this year? My passive (consisenty approach) or my active (alpha seeking approach)
The question shifts from did I beat the market or did it beat me?
Into which account did better then the market and should I put more of a focus on it in the year ahead?
For myself personally, my passive accounts have done far more of the heavy lifting for me this year then my active accounts. Seeing this in black and white, for the year ahead, I will continue to divert any extra savings towards my own passive accounts. For you, it might be different, if you did much better from an active trading standpoint then you know where to divert this extra funds to.
As we started the year at all time highs, the skys were clear and most talking heads and CEO's outlook was for clear skys to continue, yet the opposite occured.
Currently with it cold, rainy and snow on the forecast ahead as most talking heads keep persisting this crappy weather in the market is going to continue. Often it can be wise to prepare more so for what most are not expecting.
It still might get colder and crappier in the short term then we might be ready for but with most people looking for 2023 to continue to head south, it might be wise to start looking up as things are rarely as bad as people try to make them out to be.
Macro Rotation Outlook