By Adam Talmadge
Staff Writer
During winter break, U.S. stocks decreased in value by 10 percent and hit lows on Christmas Eve. This was caused by a few factors, including the trade war with China and investors moving their money toward safer investments. The Federal Reserve was the catalyst for December lows, as it agreed to raise interest rates. An interest rate hike in the economy leads to less spending because consumers have less disposable incomes. Investors were spooked by the Federal Reserve’s decision to hike interest rates, which led to them investing in bonds and gold as opposed to stocks. Bonds and gold are safe havens for investors when the stock market gets choppy.
Since Christmas lows, the stock market has bounced back and gained over 12 percent, even surpassing highs before winter break. Investors are still skeptical as to whether this is a bear (declining) market rally or a start of a new bull (rising) market. The Federal Reserve is met Wednesday to decide if they should raise interest rates again. Federal Reserve will keep interest rates at their current levels. Had the Federal Reserve decided to hike rates, it would have been a surprise. A move of that nature would have certainly caused some unexpected volatility in the stock market.
Through all this stock market noise, SIMM is staying on course. Investors are often overconfident, especially average investors. They often think that they can time the stock market and outperform other investors. In reality, it is very difficult to buy and sell stocks at exactly the right time in the stock market. Usually, investor overconfidence leads to average investors underperforming; if they would have just left their investments alone, their results could have been better.
For SIMM, our strategy is to remain invested in the market through the ups and downs. We believe there is a low probability we will be able to time the market and instead stress that we are diversified. Being diversified allows us to be less susceptible to market volatility because we have investments across many different market sectors. We believe this strategy is beneficial for our portfolio moving forward.
talmadaj14@bonaventure.edu
