What Just Happened

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The market just had one of its worst weeks in months.

On Wednesday, the new inflation data came in sending stocks into a downward spiral. When I checked the S&P 500 after the news, there were only three green stocks in the entire index.

Seeing all the red had me itching to buy something so I added to a couple of the OG ETF positions on Friday. In my normal brokerage account, I bought VOO (S&P 500). In the Roth IRA, I added QQQ's cheaper brother QQQM.

I had another topic planned for this week's email but with all the drama I figured I would double down on the weekly recap.

So here are my summarized thoughts on the condition of the market and why your 401k is bright red at the moment.

Quote

“In the midst of every crisis, lies great opportunity.” - Albert Einstein

What Just Happened

If you had to guess the most used word in the finance industry in 2022 what would you say?

My pick would be inflation.

To summarize the spark that led to the recent decline in markets here is a 15-second recap of the inflation report.

The major "red flag" was the consumer price index (CPI) gaining 0.1% month over month. The increase was driven by prices of food, shelter, and other services despite energy costs decreasing 5% for August. The year over year value came in at 8.3%, and while lower than the peak of 9.1% we saw in June, it's still worrisome.

Concerns about the Fed only increasing rates by 50 points vanished faster than the Dallas Cowboy’s super bowl hopes. It's not off the table that we see a full percentage point hike next week (stocks wouldn't like that).

This fear triggered the fall that led to the S&P posting its worst single-day loss since June 2020. The Nasdaq plunged over 5% and some of the major tech names saw double-digit percentage moves to the downside.

It wasn't pretty.

Going forward I think there could still be more red to come. My main reason for saying this is the potential of the Fed to do a 100-point hike this upcoming week vs the expected 75 bps.

If we see a full point increase, mortgage rates will continue to climb. Currently, the 30-year fixed rate mortgage is at 6.02 percent. This is the first time mortgage rates have been over 6% since 2008.

Now I know I sound bearish as hell but I'm not trying to scare you.

These are just the facts of what is going on at the moment. If there is one thing the market doesn't like, it's uncertainty, and there is plenty of that to go around at the moment.

The Plan

I plan to continue with monthly contributions and stockpile any extra cash in case we see this decline continue. Over the last few months, I have invested more than usual so I'm not too concerned if we rip up from here as I have bought quite a bit at this level. If we decide to trip on ourselves and fall down another few flights of stairs though, I want to have some extra cash on hand.

What I'm telling myself is to stay consistent, ignore the noise, and don't let fear ruin an opportunity.

Remember, the most dangerous words in investing are "this time is different."

That's all for now, Cade.

P.S. You might be seeing a second email from me this week with a special offer.

Best Memes Of The Week

Enjoy this post? I'd appreciate it if you share it with friend. Thanks, you're the best.

What I liked this week:

Japan's Debt Crisis Is Nearing Collapse - Another factor playing into the current fear and uncertainty is Japan's economy. Get the details in the great video by Nate.

Should You Stop Investing To Pay Off Student Loans - Solid podcast by The Money Guy Team on paying down student loans.

Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email send me a DM on twitter. See you soon!