Timely & Relevant News: What A Difference 6 Weeks Makes!

Do you remember when just about 6 weeks ago at the end of October, markets hit lows for the year? That was largely a result of rising interest rates, which rose approximately 25% in just 60 days from the end of August to the end of October. Specifically, the yield on the 10-year U.S. Treasury rose from approximately 4% to approximately 5% very rapidly.

Well now, investors have something to cheer about as the Dow just hit new all-time highs of over 37,000 points on December 13th. This was largely in response to a rapid decline in interest rates as the yield on the 10-year Treasury has fallen from approximately 5% to 4%. Rising stock and bond markets are also responding to the Fed's recent announcement to leave the Fed Funds Rate unchanged for the rest of the year. Additionally, the Fed has forecasted three rate cuts next year.

If you recall, a similar market phenomenon occurred in October of 2022 and in the spring of 2020 when the stock market significantly pulled back and then subsequently rallied. These pull-backs and corrections may represent ideal times to invest cash. This may also be a good opportunity to remind ourselves that future pull-backs and bear markets represent buying opportunities. 

Did you know that stock market returns have been positive in 24 of the past 30 years? While stock market returns vary from year to year, they’ve maintained a consistent upward trend over time – and that benefits investors who can learn to stomach a bumpy ride.


Down markets are always a risk. Many investors lost money in 2022 - however even worse, some investors locked in their losses by moving investments to cash. Investors who moved money to the sidelines last year may be finding it difficult to get back in.

Investments in the stock market have outperformed cash by significant margins despite ups and downs. For example, see how $10,000 would have grown in stocks over the past 15 years compared to cash and bonds - a period that also included four bear markets.

What Pitfalls Should I Be Aware Of?

Focus on what you want to do with your money—not the trends and noise that could pull you off track. One danger that could potentially derail your plans are emotions. Emotions can distract from goals by driving you to deviate from your plan. Instead of letting market volatility dictate your actions, always look to your plan for guidance. A good plan that’s carefully crafted and has flexibility should enable you to make rational decisions and decrease the risk of being blindsided by unexpected factors.

"Most of our clients only get to experience significant life events once, such as retirement. As financial advisors, we go through these events dozens of times as we guide each client. This enables us to have the knowledge, experience and wisdom to best serve our clients," said President and CEO of Covenant Wealth Strategies, G. Ward Keever, IV, CLU, ChFC, RHU, AEP, CFS, AIF, CKA®.

If you have questions about your specific financial planning or investment strategy needs, we welcome you to Contact Us to set up time to discuss further. 

Disclosures:

All investing involves risk, including loss of principal. Indexes are not investments, do not incur fee and expenses and are not professionally managed. It is not possible to invest directly in an index.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax situation with a qualified tax advisor. The charts above are for illustrative purposes only.