Thoughts on the Current Market Environment

Thoughts on the Current Market Environment

March 01, 2022

The market has experienced a generous amount of volatility to start the year 2022. We wanted to take this opportunity to go through a few general reminders during a time like this.

Making decisions based on emotions is a dangerous game.

The media can bring us stress and can cause us to feel strong emotions. In investing, these emotions could potentially cause us to make quick decisions we may later regret.

For example, on the morning of February 24th, 2022 (the day I’m writing this), the stock market dropped significantly because of the news of Russia invading Ukraine. But as the day wore on, the markets shifted and started to rise. The S&P 500 actually ended the day up 1.5%.

What happens in the coming days remains to be seen, but making a quick decision when emotions are heightened may end up being something to regret. The market isn’t always rational in the short term, and it won’t always react in lockstep with geopolitical tensions, political news, etc.


(Image Source: First Trust Portfolios L.P., S&P 500 Index: Performance After Its Worst Days, 12/31/2021)


We invest in companies – not countries, not politicians.

Companies constantly innovate and adapt to the changing environment around them, and they can still thrive during uncertain geopolitical environments. Company earnings matter in the long run, and they have been very strong recently.

From a recent Weekly Market Commentary put out by LPL Research, we see that “the numbers this earnings season have been great even without considering that the bar has been raised consistently throughout the pandemic. S&P 500 earnings per share are tracking to a 31% year-over-year increase…roughly 10 percentage points above the consensus estimate when earnings season began.”

Corrections in the stock market are normal.

A slide in the J.P. Morgan Asset Management Guide to the Markets shows that over the past 42 years, there have been average intra-year drops of 14.0% in the S&P 500, yet annual returns were positive in 32 of 42 years.


(Image Source: J.P. Morgan Asset Management: Guide to the Markets, Annual Returns and Intra-Year Declines, 2/24/2022)


War is an unfortunate reality, but as we can see from the below chart from First Trust, the market has been resilient historically.


(Image Source: First Trust Portfolios L.P., War Times & The Stock Market: S&P 500 Index, 12/31/1927 - 2/23/2022)


Here at Walker Covey Wealth Advisors, we understand that it can be stressful staying invested while also hearing constant news that causes concern. We are confident in our planning and approach and welcome you to call us at (801) 268-2300 if you have any questions or concerns.






The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

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