Wow!! What a difference a year makes! Last year at this time we witnessed the beginning of a pandemic that spawned a "black swan" event which resulted in a market sell-off of 30-50%. Needless to say, the last 12 months have been nothing short of a rollercoaster ride in so many ways.
Fast forward to today. We have already seen many of the indices hit all-time highs this year, only to see the market take a "breather" and take back some of those gains over the last several days. The beginning of the year saw many investors concerned about FOMO (fear of missing out) re-enter the market. Many investors missed the economic up tick last year and are just now getting back into the market. All this money being reinvested plus a lot of stimulus money going into the economy has boosted stock prices and bolstered returns to recent all-time highs.
What we are seeing now is a rotation out of big tech that led us out of the pandemic into other sectors of the economy. All market fundamentals are still very solid and a pullback such as we are experiencing now is actually healthy for the market in the long run. When markets go up as fast as they have over the past several weeks, some investors will take profits and reinvest into other sectors of the economy. This is healthy and actually creates a broad based recovery. One of the best indicators of the overall health of the market is the VIX volatility index. The VIX is commonly called the fear index. The higher the volatility the more uncertainties. As of today it is in the low twenties which indicates there is not a lot of fear or uncertainty out there. Some investors have rotated out of stocks into treasuries. With treasury yields only at around 1.3%, it appears to me that investing there is not even going to keep up with inflation. Stocks, in my opinion, are still the best game in town which is where we are primarily invested.
Thousands are being vaccinated daily which means the economy is only going to reopen sooner rather than later which is a huge plus for the economy. Some are predicting herd immunity by April or May of this year. The Federal Reserve said this morning they plan to keep interest rates low which will continue the housing boom. Much of the stimulus money will find its way into the stock market which will also lift stock prices. Things are certainly looking much better than they were a year ago at this time. According to Legg Mason, a global asset management firm, the market, looking back over the last 80 years, is up almost 80% of the time. We want to look at the glass as half full, not half empty. Be patient, we are in this for the long haul.