Curious about what's happening in the stock market? Every month, the alooola® team summarizes the key takeaways in a quick, easy-to-understand article!
What do I need to know?
Stop, Drop, and Roll
The technology-heavy Nasdaq index dropped more than 13% in April, its worst performance since the 2008 Great Financial Recession.
The index has only continued to drop in May. It is currently down a whopping 26% in 2022.
The drop was driven in part by the FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google), which have collectively lost $1 trillion in market value this month alone.
Over the past 140 years, the S&P500 has had 19 bear markets (defined as a drop of 20% or more). The average price decline during these bear markets was 37.3% and they lasted an average of 289 days.
Why NOT Sell
Many investors who have not lived through a market downturn are nervous and are beginning to wonder if they should pull their money out.
Here are 3 reasons why NOT to sell:
1) A 2018 study showed that of the last 153 recessions, economists only accurately predicted 5. No one has a crystal ball.
2) Investor pessimism is not a good indicator of future performance. For example, in 2009 (at the end of the great financial crisis) polls recorded a peak in investor pessimism on March 5, 2009. Just four days later the market hit its lowest point and began its multi-year bull market.
3) Over the past 20 years, 24 of the best days in the stock market occurred within one month of the 24 worst days. Not investing on the 5 best days could cut your wealth in half.
Inflation is the Worst
Inflation is now at a 40-year high.
Food prices have risen by 8% over the past year and 63% of Americans cite inflation as a reason they are decreasing consumption.
The grocery store is making consumers pockets hurt. The average price of meat has risen 11% since March 2021.
In the market for buying a car? The average price of a used car has risen 40% in the past year.
Tuition and Student Loan Debt
Are you my student loan debt? Because I'd like to have you around forever!
The total US student loan debt is a staggering $1.75 trillion, a number that has more than doubled since 2010.
The federal government holds roughly 92% of all student loan debt in the US.
This means the government holds $1.6 trillion in student loans, which is equivalent to 6.5% of the country’s total GDP.
Interestingly enough, due to lower enrollment numbers from the pandemic, college tuition fees have begun to increase slower than normal goods. Tuition fees are now rising at 0.6%, compared to US prices overall which have had a 3.2% increase.
This is the largest gap between these prices since the 1970s.
Cocktail Party Facts
The price of bacon is currently rising faster than tuition at Harvard.
85% of young American’s, regardless of political party, favor some sort of government action on student debt.
3.4 million American workers dropped out of the labor force since the pandemic began and have still not returned.
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Disclosure: alooola® is a branded investment advisory service provided by Glen Eagle Advisors, LLC, an SEC Registered Investment Adviser. The Glen Eagle Advisors brochure provides an explanation of the service and its fee structure. The material presented is for informational purposes only, and is not meant to be advice to any individual. Talk with alooola® to see how this information may apply to you. Consider your current financial situation, tolerance for risk, and investment objectives before you invest funds in securities through alooola. For a more complete explanation of the alooola® service, please visit www.alooola.com. This article includes factual data based on articles published by Reuters, Wall Street Journal, Barrons Magazine, Apollo Chief Economist Research, BofA Global Research, MFS Research "By the Numbers", and Bloomberg.
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