Stocks ended a rough week, with money flowing out of growth stocks and into value stocks as Treasury yields surged across the board. The catalyst was the December employment report, which showed tight labor market conditions with a slowdown in hiring and strong wage gains. The U.S. unemployment rate fell below 4%. But, the omicron variant, which is driving Covid-19 cases to record highs, isn’t helping.

With inflation above 5% and unemployment below 4%, it is almost a given that the Fed will raise interest rates in March. In a rising interest rate environment, the sectors that do well are not the same sectors that have performed exceptionally well in the past. It is a time of reckoning for investors – switch from the stocks that have given unprecedented returns to more staid and stable stocks that have underperformed thus far but may begin to yield better returns in the coming years.

Future Wealth’s View

When the markets are hitting new highs, there is almost too much wanting to win in the stock market. Bitcoin, Meme stocks, Rivian..the list goes on. It never adds up and it doesn’t help one’s long term portfolio. What one needs when market conditions change is discipline. Investors are constantly looking for good stocks to invest in, when what they really need are good habits. 

The pursuit of a perfect portfolio is an never ending quest. But, it is not going to come from CNBC or Reddit forums. John Bogle, the founder of Vanguard, gave us a eat-your-vegetables approach to investing which is to embrace a low-cost, passive, long term investing approach. But, the thrill of telling friends and colleagues that you scored on Tesla or in one of the many IPOs, is one that will never get old.

It is now time to resist in those indulgences. If one has not gotten their kicks in the stock market over the past few years, 2022 is not the year to try it.