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February 2022 Market Commentary

February 2022 Market Commentary

When looking at possible issues the stock market could face in the first quarter of 2022, we never thought a Russian invasion of Ukraine would be on the list.  As usual, the biggest factors are the ones we can’t yet see or even perceive.  Interestingly, there also appeared to be the inverse of the adage “Sell the Rumor, Buy the News.”  The stock market sold off swiftly on the invasion news but rebounded quickly once it happened. 

What is also making this market particularly difficult for traditional investors is that there aren’t many “safe” places to hide (more in the chart below).  Luckily, we are not stuck in traditional thinking.  We got signals to get out before the worst of the market drop occurred and went to largely cash and money market funds to weather the storm.

Now that the unknown is known, it seems likely that the market will remain volatile for a little while longer, or at least until some sort of clear resolution is understood on the Russia/Ukraine situation.  So we will continue to wait it out.

But don’t forget, the Federal Reserve still needs to make some hard decisions about raising interest rates as well as how they plan to battle inflation.  That will be the next big hurdle to overcome, even when the Russia event wraps up.

Our Shadowridge Mid-Term Cycle signal went negative on February 22nd.  And again, after our signal, the market accelerated to new lows.  Now many indications of “trend” are pointing downward, so while it is highly likely we’ll see some good rebound days coming up, the hurdles are high to turn the overall trend back to positive at this point.

As of Thursday night (February 24th, 2022), our Shadowridge Dashboard showed Positive to Negative sectors as 1 to 10.  The only positive sector has continued to be Energy.  Financials went positive briefly as the market was starting to improve just prior to the Russia news, but are back to negative now.

Now for this month’s chart2.  You can see that there hasn’t really been a good place to be while the market (and the world) have been going a bit crazy.  Even the Aggregate Bond index (black line) has been steadily moving lower.  The NASDAQ 100 (QQQ in Green) has been one of the biggest losers recently – after being one of the strongest places to be since the COVID correction.  It just shows you how quickly things can change.

Bonds – the Aggregate Bond Index AGG is already -3.91% YTD in 2022 (see above chart).  The 7-10yr Treasury bond index is -3.48% this year (FastTrack Data).  As we mentioned, that’s not a great start to the year for the asset class which is often used to reduce portfolio risk.  We’re still leaning towards Floating Rate bonds, but are eyeing the exits should the bond situation worsen.

Bottom line – we are now out of the market as much as we have been since the COVID-induced market correction in 2020.  And while this correction hasn’t been as steep, there is still the potential for it to be just as ugly.  It might take longer this time, who knows.  In the meantime, the good news is, we’ll have plenty of cash ready to buy in at better prices, once we understand how the Russia situation and the Federal Reserve/Inflation situations play out.  And that could be as early as March.  We’re watching.

Stay safe out there!!

Don’t forget to catch our monthly webinar, where I dive deeper into what I have mentioned in this newsletter commentary.  For me, nothing tells the story as much as visuals, so I really enjoy the webinar for digging into what we’re doing with investment decisions.  Will, Phil, and Laura will also be presenting timely topics to help you face life’s financial challenges and opportunities.  We hope you can join us – Wednesday, March 9th at noon Central time. 

You can sign up for the webinar here.  We look forward to seeing you there!


1 The Standard and Poor’s 500 is an unmanaged, capitalization-weighted benchmark that tracks broad-based changes in the U.S. stock market.  This index of 500 common stocks is comprised of 400 industrial, 20 transportation, 40 utility, and 40 financial companies representing major U.S. industry sectors.  The index is calculated on a total return basis with dividends reinvested and is not available for direct investment.

2 Charts are for informational purposes only and are not intended to be a projection or prediction of current or future performance of any specific product.  All financial products have an element of risk and may experience loss.  Past performance is not indicative of future results.