Will it be March madness on the stock market?

So far, Ukraine, inflation and interest rate concerns are moving the markets. Still to come are the November midterm elections and possibly a new spending and tax bill. In this gloomy context, you may be wondering: how should I invest for the rest of the year?

It’s a good question. One that I have received more frequently lately from customers. To help you out, in the spirit of the annual college basketball tournament, I’ll share some investment ideas and trends to watch. (For a deeper dive, join my webinar on March 16: 2022 Asset Allocation Viewpoints, register here.)

Long-time underdogs shine

At the end of February, the S&P 500 was down 8%. Higher growth stocks, like tech stocks, are companies that typically reinvest their dividends for future growth. These stocks fared much worse as they were disproportionately affected by rising interest rates and had higher starting valuations. Value stocks – companies that pay dividends to their shareholders, i.e. financial and energy stocks – have long underperformed growth stocks, but have held up better recently in comparison. The value outpaced growth by around 9% at the end of February.

In basketball terms: score a point for the underdog.

It’s all about defense

In the movie Hoosiers, coach Norman Dale (Gene Hackman) yells at his players, “I saw you know how to shoot, but the game isn’t just about shooting. There are the fundamentals and the defense. If Coach Norm was an investor, he might think of defensive stocks. Consumer defensive stocks are stocks that typically provide dividends and have stable earnings or for which there is consistent demand for a company’s products. Utility providers like natural gas, food and beverage companies, or health care providers may be considered defensive consumer.

Why Consider Defensive Actions? Higher energy prices and higher interest rates could dampen growth this year or, worse, drag us into a mild recession. If that happens, in my view, the companies best positioned to thrive could be suppliers of consumer products we just can’t live without.

have balance

Coach John Wooden is a college basketball legend, winning 10 national championships in his final 12 seasons at UCLA before retiring. He shaped his winning philosophy into the “Pyramid of Success” – traits he felt were important for his players. Near the top of the pyramid is “balance”.

Poise, in Wooden’s words, means “Do not be deterred by events, whether good or bad.” This is true in the investment world. Balance in investing means not being reckless, not making impulsive decisions, but rather putting emotions aside and thinking clearly, logically. It’s time to balance.

Final Thoughts

There is still a long way to go until the end of the year. We are only in the first quarter. Given the market slump, you may want to stop some time and make sure your asset allocation matches your goals and objectives.

It’s never too late to take a mental health check. If you were thinking of rebalancing, moving from growth stocks to value, the market probably already did it for you in January, but it doesn’t hurt to check. You want to know in which sectors are you over- or underexposed. Do you have too much technology? Do you own any defensive stocks?

If you haven’t already, consider tax-loss harvesting. Tax loss harvesting involves selling and booking a loss to offset a gain elsewhere in the portfolio to lower your tax bill.

It’s also a good time to review your obligations. What is the credit risk? What is the interest rate sensitivity? You need to know the details. As Coach Wooden once said, “It’s the little things that matter. Little things make big things happen. The same principle applies to investing, know the details.

The author provides advice on investing and financial planning. For more information or to discuss your investment needs, please Click here to schedule a free call.

Summit is not responsible for hyperlinks and any externally referenced information found in this article. Investment advice and financial planning services are offered by Summit Financial LLC, an SEC-registered investment adviser, 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600 Fax. 973-285-3666. This document is intended for your information and advice and is not intended to be used as legal or tax advice. Investors can realize short-term capital gains on temporary positions using a tax-loss harvesting strategy. Clients should make all decisions regarding the tax and legal implications of their investments and plans after consulting their independent tax or legal advisers. Individual investors’ portfolios should be constructed based on the individual’s financial resources, investment objectives, risk tolerance, investment time horizon, tax situation and other relevant factors. Past performance is not indicative of future results. The views and opinions expressed in this article are solely those of the author and should not be attributed to Summit Financial LLC.

CFP®, Summit Financial, LLC

Michael Aloi is a CERTIFIED FINANCIAL PLANNER™ Practitioner and Certified Wealth Management Advisor℠ with Summit Financial, LLC. With 21 years of experience, Michael specializes in working with executives, professionals and retirees. Since joining Summit Financial, LLC, Michael has implemented a process that emphasizes integrating the various facets of financial planning. Supported by an in-house team of estate and tax specialists, Michael provides clients with coordinated solutions to disparate issues.

Investment advice and financial planning services are offered by Summit Financial LLC, an SEC-registered investment adviser, 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600 Fax. 973-285-3666. This document is intended for your information and advice and is not intended to be used as legal or tax advice. Clients should make all decisions regarding the tax and legal implications of their investments and plans after consulting their independent tax or legal advisers. Individual investors’ portfolios should be constructed based on the individual’s financial resources, investment objectives, risk tolerance, investment time horizon, tax situation and other relevant factors. Past performance is not indicative of future results. The views and opinions expressed in this article are solely those of the author and should not be attributed to Summit Financial LLC. Links to third party websites are provided for your convenience and informational purposes only. Summit is not responsible for information contained on third party websites. Summit’s financial planning design team has admitted attorneys and/or CPAs, who act exclusively in a non-representative capacity with respect to Summit clients. Neither they nor Summit provide tax or legal advice to clients. All tax declarations contained in this document have been not intended or written to be used, and may not be used, for the purpose of avoiding US federal, state or local taxes.

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