Ditch the index. Leave it behind. Indices are arbitrary, they have their path to follow you have yours. Let’s face it, you know where you want to go, the index doesn’t. Calibrated thinking places your goals as your index—your barometer. By charting your path, balancing your investment risk, and untethering yourself from an arbitrary index, you will have bought yourself freedom: freedom to turn off the noise.
At Calibrate Wealth, we start with Why — the why you do this in the first place. Restated: we calibrate your plan by starting at the end and looking back to where you are. Next, we help you define your path. We make your path safe and direct; we continually review, readjust, and repeat.
At Calibrate, we put the focus on things we can control. We start with your input, risk. And risk is, after all, what you add when you invest. In contrast, returns are the hoped-for output from your investment. Calibrated investing begins with the risk input and works forward. We balance risk between asset classes and between market outcomes. We accept the future as being uncertain, and build investment strategies with that understanding. We build your strategy designed to accommodate all types of market climates, not just one for the “good times.”
The shortened holiday week got a shock this morning when stock markets around the world dropped precipitously on news that a new strain of the coronavirus is emerging in South Africa. This new strain, with much still unknown about it, seems more impervious to vaccines currently on the market. The immediate reaction in financial markets is to revert back to the playbook from early spring 2020. “Stay at home” stocks and bio-pharma stocks lifted off as did the prices of long-term US treasury bonds. All of the “opening” stocks took a dive.
The October CPI was released this week and shocked the market with a hotter than expected reading of 6.2% year over year inflation. The Fed has, up until now, believed that hotter inflation was temporary—transitory in their language. They are beginning to reassess that belief now. At the beginning of the pandemic the Fed changed its inflation target from 2% to what I would call 2%-ish. Namely, they determined that previous attempts to halt inflation at 2% had the effect of either causing economic downturns or continued deflation.
Stock indices closed the month of October having recovered all of the ground they ceded in September. For the month, the S&P 500 gained over 6.75%, the Nasdaq 100 added 7.47%, and the Russell 2000 gained just under 4%. Big tech names were the biggest winners this month. Tesla gained a whopping 41.7%, Nvidia gained over 23% and Microsoft added 17.12%. These are some rather significant moves for companies with extremely large market caps.
This week the market seems to have shaken off the September slump. After struggling to put together a convincing rally during the last 18 trading sessions, the S&P 500 appears to be breaking out above previous resistance levels. If the market holds its current levels as of 12:30 pm very little stands in the way of it regaining the highs set in early September. However, much remains to be proven before we can confidently state that the persistent upward trajectory of the market will resume.
