stock market returns, Q1, 2021, financial planning, CFP, San Diego

Q1 2021 Market review

The stock market continued its upward climb in the first quarter of 2021, while bonds faced headwinds of rising interest rates resulting in lower prices. The US stock market was up over 6%, international stocks were up over 4% and emerging market stocks were up over 2%. Bonds in the US fell around 3.4% and globally were down almost 2%. Though the drop in bonds was fairly tame relative to the ups and downs that the stock market often experiences, this quarter was one of the worst on record for US bonds. For a detailed Market Overview, click here.   Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

Investing 2021 Interest Rates Stock Market Financial Planning Retirement

March madness

I had a number of topics come to mind that I wanted to touch on this month, so instead of choosing one I’ve decided to select a few, all related to the month of March. Five years ago, on March 1, 2016, I started my independent financial planning practice. For someone with a fairly conservative nature this was a step of faith but one that I strongly felt called to. I am grateful to say that though there have been many lessons learned, I have no regrets and am fortunate to love what I do and would like to think I am having a positive impact along the way. For everyone who has supported me in one way or another, I want to sincerely thank you! This of course includes my family, friends, clients, and others that have supported this venture and provided guidance and encouragement along the way. Next up, it has been just over a year since the coronavirus pandemic was declared a national emergency. I remember it well because it was on my birthday, March 13th, when things changed quickly for all of us. Kids were kept out of school, church and work had to be done from a distance and the world felt very strange. Financially, this last year has been devastating for many, yet who would have guessed that it would also be rewarding for many others. The market dropped faster than it ever had in history and similarly recovered very quickly. Predictions about where markets are headed in the short run are always difficult and 2020 was a prime example of that. This provided a reality check to review many areas of our lives, including our finances, and to remember what is most important. Though the virus is still with us, I’m thankful that we seem to be moving in the right direction. Lastly, and for a bit of fun, let’s talk about March Madness with a financial spin. I’m really glad that the NCAA tournament will be taking place this year. The tournament was canceled last year and having sports return really helps bring a sense that things are returning to normal. I don’t follow college basketball closely but it’s fun to watch these games, especially as it gets into the Sweet 16. Being a UCSD grad, I don’t have much to follow in the way of college sports but cheering for my wife’s alma mater, SDSU, has been fun. NCAA money matters: - It is estimated that about $10B is gambled or bet over the course of the tournament, which is a lot of money even though we keep hearing about trillions of dollars mentioned on the news. - Warren Buffett loves to follow the tournament and usually offers his employees a chance to win some big money. This year, whoever picks the most winning games before a loss gets $100,000. If someone chooses all first-round games accurately, they get $1M. If that person also gets all the second-round picks, they get that $1M each year for life! And as the final icing on the cake, if Creighton University (located in Buffett’s hometown of Omaha, NE) gets to the final 4, these numbers double! - Investment firm Columbia Threadneedle put out an NCAA bracket (click here) showing the 4-year cost to attend each college in the tournament. For me, this was another reminder that college planning is an important part of an overall financial plan. Though I still have a number of years before my kids hit college age, it seems to be approaching faster and faster and sticker shock is starting to hit me!!!  Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

Gamestop  stock market investing 2021

What is going on??? - Gamestop

  A relatively small public company called Gamestop, grabbed a lot of headline news this last week. It’s a very interesting situation and I want to provide an overview of what has happened and my brief thoughts. What happened? Gamestop (ticker symbol GME), who is generally viewed as a struggling retailer selling video game consoles and games, had their stock go from around $20/share in mid-January to over $300/share (hitting almost $400 at one point) at the end of the month. This amazing price jump is credited to an online forum on the website Reddit, called r/wallstreetbets. Many people, largely assumed to be a bunch of small retail investors (though institutional investors likely jumped in) collectively started buying GME thinking they could move the stock price higher, which they did. A major reason this stock was selected is because it had a lot of short positions on it. By buying this stock with many short positions, they knew those positions would have to be covered at some point, so it was also viewed as a way to stick it to Wall Street and hedge funds and beat them at their own game. What does it mean to short a stock?To short a stock means you are betting the price will go down. Essentially it works by borrowing the stock and selling it, with the assumption you can buy it back in the future at a lower price and return the borrowed shares. A simplified example would be if you borrow stock and sell it at $20, then buy it back down the road at $10 and return the borrowed shares and pocket the price difference. Obviously, this is a risky strategy because at some point you have to return the borrowed shares, so if the price goes up you can lose when you are forced to return the stock, called a short squeeze. Hedge funds are known for using these types of strategies, and several were known to have some large short positions in GME. For instance, Citron Research said they shorted the stock at $40 and covered that position by buying it back at $90 for more than a 100% loss. It is said that about $20B has been lost from short positions in GME.  This, on a company that was valued in total at just over $1B in mid-January, but recently over $20B. What is the impact?For most people, essentially nothing. GME was a small company, not widely owned or popular. For those who jumped in early enough they may have seemingly won the lottery, for others, losses are very likely. The bigger issue to me is that this has grabbed the attention of all major brokerage firms and the Securities and Exchange Commission. The SEC is responsible for protecting investors and ensuring markets are fair and honest. There is almost no doubt they will be investigating this situation (and other similar ones that have popped up, such as with AMC stock). This situation seems to have brought to light a new challenge with regulating consumers in this age of rapid information and trading tools at our fingertips. Many brokerage firms, including Charles Schwab, TD Ameritrade, Robinhood (the trading app that many of these GME buyers are often said to use), and others took matters into their own hands, limiting certain types of trades in these stocks. Will anyone get in trouble or be held accountable for what has happened? I don’t know, but I do believe we are likely to see further oversite and regulation at some point. What are my thoughts?I believe GME is a house of cards, some will profit handsomely but many more will end up losing money. This open letter on MarketWatch is a wise warning. I do not believe this presents a systemic issue to the overall markets at this point. This manipulation of a stock was able to be done on a small company, again, worth just over $1B in mid-January, compared to a US market worth over $50T. The situation has been very interesting to watch and seems to have revealed a chink in the armor. Overall, I believe markets remain generally efficient, though never perfectly efficient. This was brought on by human behavior and is gambling, not rational investing (there is no way you can justify the current value of GME from a fundamental standpoint). Markets, or certain areas of markets, can function irrationally at times (look at the internet bubble in 2000-01), but the long-term trend is much more rational.  Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

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Retirement Planner in San Diego

 

Advisory services offered through Arbor Point Advisors. Securities offered through Securities America, Inc., Member FINRA/SIPC. Arbor Point Advisors and Securities America are separate companies. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. CA Insurance #0E88557

Advisory services offered through Arbor Point Advisors. Securities offered through Securities America, Inc., Member FINRA/SIPC. Arbor Point Advisors and Securities America are separate companies. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. CA Insurance #0E88557​

Rancho Bernardo Financial Planner