Choppy Waters

Choppy (adj.)

chop·py | \ ˈchä-pē \
1: being roughened : CHAPPED
2: rough with small waves
3a: interrupted by ups and downs

Occasionally a word or phrase can become synonymous with financial market conditions. “Irrational exuberance” when stocks are rallying and a “risk off “market when stocks move to the downside. This investment jargon confuses investors but makes for a good soundbite on the business channels. An appropriate word to describe today’s markets may be “choppy”.

With many equity markets down 25% or more, markets are susceptible to relief rallies, which we witnessed this past week. Looking at the data below, since last Thursday through Tuesday of this week the Dow Jones Industrial average has had some material moves. We expect this trend to continue.

The Dow Jones Industrial Average

Dow Jones industrial average chart

Choppy markets are not necessarily a negative for investors. Having a disciplined process of rebalancing and dollar cost averaging has historically proven valuable during these time periods. After the material and broad-based declines this year, we are starting to believe that stocks are pricing in much of the bad news expected in the coming months. In our recent HFS Investment Committee meetings, our discussions have been focused on when it might be time to get more positive on stocks and bonds.

Being mindful of the risks that are present, there were some positive signs on earnings this past week. Financial and some consumer companies reported better than expected earnings and, while they cautioned about the risk to the economy, the consumer and credit quality remain in good positions. Therefore, choppy may be an appropriate description. We don’t see material declines from these levels but also not a steep move upward like the post covid move of the summer of 2020.

It is important in the last quarter of the year to review your financial plan, address any cash needs or excesses that can be invested, and lastly review any potential tax moves for year end.

Source: Merriam Webster, The Wall Street Journal

The opinions expressed are those of Harrison Financial Services as of October 20, 2022 and are subject to change. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment or security. Please remember that all investments carry some level of risk, including the potential loss of principal invested. Indexes and/or benchmarks are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance and are not indicative of any specific investment. Diversification, strategic asset allocation, and dollar cost averaging do not assure profit or protect against loss.