The stock market finished the week in negative territory, but it could have been a lot worse after hot inflation data upset the market mid-week. The Nasdaq Composite (-2.3%) and Russell 2000 (-2.1%) were this week's losers with losses over 2.0% while the S&P 500 (-1.4%) and Dow Jones Industrial Average (-1.1%) declined closer to 1%.
Through the first three sessions of the week, the Dow was down 3.4%, the S&P 500 was down 4.0%, the Nasdaq was down 5.2%, and the Russell 2000 was down 6.0%. Over the next two days, the Dow gained 2.4%, the Nasdaq gained 3.0%, the S&P 500 gained 2.7%, and the Russell 2000 gained 4.2%.
The horrible start was attributed to negative momentum in the growth stocks, rotational factors, and a noticeably hot Consumer Price Index (CPI) report on Wednesday. The m/m changes in consumer prices exceeded expectations, and when looking at the last six months to exclude easy base effect comparisons, total CPI was running at an annualized pace of 5.0%.
Investors used the weakness as an opportunity to buy the dip with a little help from several factors:
- A retracement in long-term interest rates, signaling that the Treasury market wasn't concerned about inflation even after receiving additional hot inflation data apart from the CPI report.
- Apple (AAPL) reclaiming its 200-day moving average (123.28) and the S&P 500 respecting its 50-day moving average (4064).
- The CDC saying fully vaccinated people can engage in most activities without masks.
- A view that the market was oversold on a short-term basis and was likely due for a bounce.
Eight of the 11 S&P 500 sectors still ended in negative territory, though, including the consumer discretionary (-3.7%), information technology (-2.2%), and communication services (-2.0%) sectors amid weakness in their mega-cap components. The consumer staples (+0.4%), financials (+0.3%), and materials (+0.1%) sectors closed higher.
It'll be interesting to see how the growth/technology stocks perform moving forward when money has been flowing into the cyclical/value stocks on reopening/inflation expectations and analysts have been calling for sustained underperformance. Many growth stocks are down substantially from their peaks in February.
The 10-yr yield increased six basis points to 1.64% from last Friday's settlement, but this was below the 1.70% settlement on Wednesday. Copper prices decreased 2% to $4.648/lb., representing many of the commodities that cooled off this week.
5 Techniques to Overcome Financial Stress
Money is the second leading cause of stress amongst adults.1 If you find yourself worried about your financial wellbeing, you're not alone - and there are things you can do to make it better. Financial stress can stop even the most productive people in their tracks, causing sleepless nights, avoidance of debt and denial. While it's best to talk to your financial professional about what's on your mind, here are a few tips to start managing your stress on your own.
Tip #1: Make a To-Do List
Sometimes the most effective techniques are the simplest. When it comes to overcoming your financial stress, start by putting your to-do list in writing. Creating a clear list of what’s ahead can help it feel more tangible and doable. If you can, start with the easiest tasks and slowly work through your list, checking things off one by one. With a to-do list in front of you, there’s no need to bear the burden of remembering everything in your head. Starting with a list of tasks can help you more effectively build a plan of action.
Tip #2: Try Talking to Someone
While working with a financial advisor is recommended, it can still help to open up to a family member or friend in the meantime. Keeping everything bottled up and to yourself is only going to escalate your anxiety. If you’re able to, talk it out with someone you trust and be honest. Discussing your problems can ease the burden significantly. Your friend or family member may even have some advice to offer or a financial advisor to recommend.
Tip #3: Review Your Spending Habits
Ignoring the situation may be tempting, but putting your financial obligations off will only make them worse. While some financial issues are more complicated than others, taking stock of your current situation can help build a better understanding of where you are today and what needs to happen. This often starts with adjusting your spending and saving habits. When it comes to addressing your current spending habits, there are a few things you can do right away:
- List out every income source you currently have
- Determine your debts (student loans, car payments, credit card debt, etc.)
- Keep track of all your spending manually or using a phone app
- Identify potential spending patterns or triggers (when you’re stressed, right after payday, etc.)
- Determine what changes you can make to your average spending to save more
- Avoid impulse spending
Tip #4: Make a Plan and Create a Monthly Budget
Creating and tracking a monthly budget is a great way to get in the habit of healthier spending - and healthier spending habits mean less financial stress.
To get started on creating your monthly budget, start by:
- Listing out recurring expenses such as gas, groceries, utilities, etc.
- Prioritize contributing to your emergency fund each month
- Set up automatic payments to avoid late fees or interest
- Determine where you may be able to cut down on spending (entertainment, clothes, etc.)
Tip #5: Establish a College Savings Plan
If you have a young one at home, paying for college is likely looming over your head. To ease this large financial burden, take the time now to establish or check up on your 529 plan. This tax-advantaged savings plan is designed to encourage saving for future education costs (such as tuition, room and board, etc.). You and other family members can contribute to the account, which will gain interest over time as you set aside funds to pay for a child or grandchild’s education.
Getting your finances in order is no easy feat. Identifying your main stressors and establishing a plan to address them can make a big difference in how you and your family feel about your finances. If you’re feeling lost, confused or overwhelmed, don’t forget to reach out to a trusted financial professional who can help make sense of your current financial situation.