MOTHER of All Bear Markets!

Remembering What’s Important Amid Market Sell-Off

Dear Reader,

Wall Street can be a heartless place where zero-sum gains mean that some folks must lose money so that others can make it. Hopefully, we can all take a mental day off from the Hunger Games-like financial markets and appreciate how our mothers instilled good values in us, including compassion and integrity.

Focusing on doing what’s right regardless of what your peers are doing is something my mother instilled in me a long time ago. There was also an emphasis on sticking to your core values. Perhaps your mother brought you up with those same values. They can certainly help guide investors in these turbulent times.

It’s crazy to think that the NASDAQ is down 23% year-to-date. Technology stocks have led the way forward for years – and even generations. But as they say, the bigger they are, the harder they fall.

Meanwhile, the somewhat less tech-heavy S&P 500 is down 14% this year so far, while the mega-cap-dominated Dow Jones Industrial Average is down 10%. This suggests that growth stocks (particularly tech stocks) are dragging down all of the major stock market indices.

If your mother warned you against taking on too much risk in life, she was 100% right, though it took a while for the high-risk, high-reward stocks to roll over. They’re certainly rolling over in 2022, though, as some of last year’s market darlings are now persona non grata:

• Robinhood (HOOD): Down 87.5% from 52-week high
• Peloton Interactive (PTON): Down 87.1%
• Rivian Automotive (RIVN): Down 83%
• AMC Entertainment (AMC): Down 79.8%
• Teladoc Health (TDOC): Down 79.5%

Even Netflix (NFLX) stock, a member of the tech-centered FAANG group of stocks that propped up the market for years, fell 73.1% from its 52-week high. Other pandemic favorites, such as Shopify (SHOP) and Zoom (ZM), also declined by more than 70%.

Since late 2021, more than $9 trillion of U.S. stock market value has vanished. You might say that today’s market is so ugly that it has a face that only a mother could love. It’s staggering to consider that 10 “retail favorite” stocks have collectively lost over $1 trillion of market value since their respective peaks.

Your parents warned you about excess – and Crush The Street has repeatedly advised taking profits – but we don’t always heed sensible advice, do we? As kids and teens, we eat junk food and party instead of studying. As grown-ups, we succumb to the temptation to jump on bandwagons and buy during hype phases.

Today, pessimism and fear, the “blood in the streets” scenario, is decimating the sentiment on Wall Street. Everyone was feeling complacent – even euphoric – leading up to this stock bubble, but things are now reversing course just as quickly.

The media and the White House might point to the Ukraine crisis as the root cause, but stocks started to crater before that crisis escalated. A more credible explanation comes from investing legend Mohamed El-Erian, who bluntly stated, “The mess we’re seeing in the market is about liquidity.”

“We haven’t priced liquidity risk… The days of abundant and predictable liquidity are gone,” El-Erian added. This is what I’ve been saying for months now: as the Federal Reserve stops buying bonds in massive quantities, the artificial pillars of the financial markets will give way.

They’re giving way right now as we’re witnessing some of the worst months in stocks in a very long time. This doesn’t mean that investors should just hide out all in cash, though. Summers tend to be good months for the stock market, and it’ll be something we’ll be watching, especially after months of blood.

Thus, we come full circle since Mom’s core values can help us navigate these choppy, scary market conditions. People are often motivated by fear vs. greed, which is why times of carnage in the markets can seem so devastating – but you avoid emotional investing and focus on value plays in times of elevated inflation and volatility.

I firmly believe that metals in this environment, along with Bitcoin after the chips settle, will be where money flows. Guarding against rampant dollar inflation will be a priority for the remainder of the year, and probably 2023 as well.

So, let’s take the time to honor our mothers who have been there for us during the bad times as well as the good ones. Let those core values guide you through the challenges we’ll all have to face in life, especially in these merciless markets.