Client note on volatility and inflation

If you’ve felt like stock prices have been more volatile in 2022 than in recent years, you’re right on the money. Let’s take a look. Big picture The S&P 500 has posted 81 daily moves of at least 1% through August. Of those moves, 39 have been to the upside and 42 to the downside. In this chart, we’ve highlighted 2022 to show how it compares to other years since 2000. Since the daily report was compiled, stocks have seen a few more 1% swings. Why’s this happening? The Fed, largely. Its monetary policy of raising interest rates to slow inflation without triggering a recession has created a lot of uncertainty. With more than 70 trading days left in the year, it’s probably a safe bet to say we could see more. Price swings are unnerving, but as that chart above shows, they are nothing new. Digging deeper We’re entering a tricky time of year: the Fall has a reputation for bringing an extra measure of market volatility. Some of the stock market’s most challenging events have hit in September and October. Other seasonal trends can also play a part. Investopedia found that institutions start preparing for year-end distributions around

September 13, 2022 No Comments

What should you do now that the Fed has raised rates again?

In mid-December, the Federal Reserve raised interest rates again, contributing to some of the whipsaw volatility we saw at the end of the year. As an investor, you may be wondering what you should do now. Consider these three things: Review your portfolio Does your asset allocation still match your time horizon, risk tolerance, and investment goals? If so, you might consider leaving things unchanged. It might not sound like a special strategy, but most people miss out on the long-term gains of the market by making moves at the wrong time. Keep on keeping on There will probably be more volatility in store. Embrace it. The S&P 500 stock index has become more turbulent in 12 of the last 14 tightening cycles, including this one. But that shouldn’t mean a whole lot to a long-term investor. Ride the market’s ups and downs, and you could be rewarded for your patience. Diversify Treasury bonds are most sensitive to movements in interest rates. As an alternative form of fixed income investment, consider high-quality trade finance investments and sukuk, both of which offer liquidity and diversification benefits in a rising rate environment. And for some serious diversification, it’s hard to beat participation

January 4, 2019 No Comments

Azzad announces tech solution to help clients cope with volatility

Riskalyze is designed to calculate investor ‘comfort zone’ with a Risk Number® We are pleased to announce that Azzad has implemented Riskalyze, the world’s first risk alignment platform, to address our clients’ concerns about market volatility. Built on a Nobel Prize-winning framework, Riskalyze quantifies investors’ risk tolerance with the Risk Number®, a number between 1 and 99 that pinpoints an individual’s exact comfort zone for downside risk and potential upside gain. Azzad advisors then build an investment portfolio to match the client’s Risk Number and chart a defined path to the client’s goals. Riskalyze was twice named one of the world’s 10 most innovative companies in finance by Fast Company Magazine and has appeared twice on the Forbes FinTech50 list. “Azzad has ushered in a new era of predictability and reliability for their clients by investing in the world’s first risk alignment platform to pinpoint a client’s Risk Number and align their portfolio to fit. We love working with advisory firms like Azzad, who are committed to investing in the success of their clients by empowering fearless investing.” – Aaron Klein, Riskalyze CEO Recent market volatility has made our decision to offer Riskalyze to clients all the more important. As pioneers in

February 13, 2018 No Comments

Volatility strikes back

If you’re a little taken aback by the whipsaws in markets lately, you’re not alone. Though jarring, what we’re experiencing is a perfectly normal return to volatility following two years of unusually smooth sailing. The surprise was that markets ran ahead so far so fast without any appreciable pullback. Last year, we saw six of the seven lowest measures in volatility in history. Keeping your cool can be hard to do when the market goes on one of its more traditional roller-coaster rides. It’s useful to have strategies in place that prepare you both financially and psychologically to handle market volatility. Here are a few things to keep in mind: Have a game plan Having predetermined guidelines that recognize the potential for turbulent times can help prevent emotion from dictating your decisions. For example, you might take a core-and-satellite approach, combining the use of buy-and-hold principles for the bulk of your portfolio with tactical investing based on a shorter-term market outlook. You also can use diversification to try to offset the risks of certain holdings with those of others. Diversification may not ensure a profit or guarantee against a loss, but it can help you understand and balance your risk

February 8, 2018 No Comments

Keep calm and buy when there’s blood in the streets

Financial markets are characterized by long cycles with many ups and downs. Successful investors block out fear and sensationalism and recognize that these market cycles are part of investing. In practically every bull market of the last 40 years, the U.S. stock market has experienced a correction during its rise. The Dow posted its worst one-day point drop in history today (though not its biggest percentage drop). It was a classic panic-selling scenario. Here’s what you should do about it: 1) Know your history Since 1900, the U.S. has seen 125 corrections of 10% or more, which averages out to about one per year. (A correction is defined as a 10% pullback, and though we haven’t reached that territory yet, we may be headed there.) Since 1980, the stock market has had positive annual returns in 28 of the last 37 years. With that perspective, if your investing time frame is years or even decades from now, it may be best to hold tight and stay invested. Of course, there’s no guarantee that durations of future recoveries will happen in a similar time, or at all. But unless you have a need for the money in the short term, it

February 5, 2018 No Comments

Dow drops: Are you ready for the stock market roller coaster?

Stocks markets took a break from their meteoric rise of the last several months. The Dow dropped 2.5%, and the S&P 500 fell 2.1% on Friday, capping their biggest weekly decline in more than two years. Although frustrating to some, today’s losses are likely a good thing. The market was in need of a pullback. Week after week of positive results, while comforting to hear, is not how markets normally behave. Overheating was a concern on the minds of many market participants. A down week helps to tamp down the flames. Friday’s pullback was not really surprising given the extreme upsurge we’ve seen in equity prices. Moves of 2-3% are not unusual in hot markets, especially a late-stage bull market like the one we’re in. Investors need to be prepared for volatility in 2018. Setting the scene Today’s selloff followed news that the economy had added 200,000 jobs in January and wages grew at the fastest pace in eight years. Investors might be worried that wage growth could impact corporate profits, one of many examples in which the interests of asset owners and labor are not perfectly aligned. But both groups should be concerned about inflation, which is rising now

February 2, 2018 No Comments

Markets react to a Trump surprise

Azzad Special Election Comment Early this morning, Dow futures dropped 750 points in the wake of Donald Trump’s electoral victory. In fact, the news sent a shock wave through global markets, with most selling off over fears of what a Trump win means for the status quo. Although the U.S. stock market has posted gains as of this writing, investors are still left with a sense of unease. A look back at history offers an important lesson: stock market moves over the 24 hours following an election predict the market’s direction over the next 12 months less than half the time. With Trump about to assume office, keep in mind this interesting comparison showing the relationship between the U.S. government’s composition and market performance. Between 1926 and 2015, when both houses of Congress and the White House were controlled by the same party — as they will be in January 2017 — both the S&P 500 and a diversified 60/40 stock/bond portfolio averaged the highest returns.* The next highest returns came when government was “partially divided,” with the House and Senate controlled by the same party, but the White House held by a different party. The “completely divided” scenario, which occurred

November 9, 2016 No Comments

Turn lemons into lemonade during periods of volatility

Staying focused on the bright side is admittedly hard to do when the markets are volatile. Fortunately, there are always some silver linings amid market volatility. For investors who feel the urge to do something in response to the markets, here are four things you can do to help minimize your tax exposure without altering your asset allocation or getting off track from your investment plan: For your taxable accounts, a good strategy is to harvest portfolio losses when volatility strikes in order to offset gains elsewhere in your portfolio. You “harvest losses” when you sell a security that has experienced a loss and use that loss to offset realized gains. The goal is to reduce your overall tax liability in your portfolio. Harvesting throughout the year, in response to market declines, can be a smart way to maximize the value of this strategy. Of course, you’ll want to steer clear of the Internal Revenue Service’s wash sale rules. Market declines can offer you a good opportunity to convert your IRA into a Roth IRA. When an IRA declines in value, the conversion taxes won’t be quite so burdensome. And once in a Roth account, all future growth of those

June 23, 2016 6 Comments

Ask yourself these two questions in volatile markets

This has been the worst ever start to a year for the stock market, and stocks tanked again today. But that’s not all. Investors are seeking the security of government bonds. Oil continues to trade below $30 a barrel. Netflix is raising its prices. A massive snowstorm threatens the Mid-Atlantic. The new Star Wars movie didn’t get an Oscar nomination for best picture. The list of panic and chaos could go on. These recent events (at least the ones related to financial markets) have triggered lots of angst and questions from investors, some of which we responded to last Friday. Our readers have done most of the asking lately, but now it’s our turn to pose a couple of questions to you: 1) Do you have a strategy? How do you deal with market drops like the one we saw today? Instead of repeatedly smashing your head into the laptop, consider a more constructive approach. Rebalancing your portfolio so that your original asset allocation (mix of stocks, fixed income, and cash) is where you intended it to be could be a good move. To bring your asset allocation back to the original percentages you set for each type of investment,

January 20, 2016 No Comments

Answering your questions about market volatility

Stocks sold off today, continuing their up and down ride to start the year. Azzad clients are usually savvy enough to know that these types of events are prime opportunities to rebalance their portfolios or to buy stocks while they’re selling at a discount. But even the best of us find ourselves questioning our financial plans every now and then. So, let the following answers to these frequently asked questions set your mind at ease: Should I sell now? Not unless you want to turn a paper loss into a real one. Try resisting the urge to sell by thinking about things this way: if you’re stuck in traffic, would you sell your car on the spot and buy a bicycle to get out of the jam? The thought might be tempting in the moment, but long term, you’ll probably regret that decision. It’s the same with markets. Ride the market’s ups and downs, contribute regularly to your portfolio, and you could be rewarded for your patience. Remember that when you own stock in a company, you own part of a business. The value of that business does not fluctuate as wildly on a day-to-day basis as its stock price.

January 15, 2016 No Comments

Markets continue the roller coaster ride

Investors kicked off September by fleeing stocks, extending the losses suffered in August. This market is being driven by emotion, rather than a substantial change in the fundamentals of the economy. Although data have indicated a slowdown in developed markets, we have seen nothing to indicate a recessionary trend here in the United States. And all indications are that an accommodative Federal Reserve will hold off on a rate hike until at least the end of the year. What to expect now September has historically been a challenging month for stocks, and today’s selloff confirmed the stereotype. Although there is no guarantee we’ll continue to see ups and downs like we’ve experienced over the last few weeks, volatility has become more of the norm in markets. That’s due in part to a lot of the uncertainty around Chinese growth and Fed interest rate policy. It’s also healthy. Volatility can be your friend. Without it, you couldn’t make money in the stock market. Remember that when you own stock in a company, you own part of a business. The value of that business does not fluctuate as wildly on a day-to-day basis as its stock price. This means that its market

September 1, 2015 No Comments

Five ways to deal with market volatility

US markets turned in their worst returns in years this August. So, as an investor, what should you do about it, if anything? Research shows that emotional selling, or bailing out of investments because things are scary, is all too common. This is bad because investor behavior and poor decision-making can adversely affect returns. A study released in 2014 showed that the average individual equity investor had a 20-year average annual total return that was 4.20% less than the index, directly related to poorly timed decision-making.* Take the emotion out of your investment strategy by doing these five things when markets get choppy: 1) Know your history Since 1900, there have been 35 declines of 10% or more in the markets. Of those 35 occurrences, or “corrections” as they’re sometimes called, the index fully recovered its value after an average of about 10 months. And a 10% drop doesn’t necessarily lead to a 20% one (which denotes a bear market) — in fact, in just 12 of the 31 corrections in the S&P 500 over the last 50 years did a bear market eventually ensue. If anything, the reason that recent drops seem bigger is that they came after a 47-month

August 31, 2015 No Comments

Comment on recent market volatility

This week, US markets suffered their worst weekly performance of 2015, leaving the S&P 500 Index in negative territory for the year after being up nearly 6% during its mid-July peak. So, as an investor, what should you do about it, if anything? Research shows that emotional selling, or bailing out of investments because things are scary, is all too common. This is bad because investor behavior and poor decision-making can adversely affect returns. A study released in 2014 showed that the average individual equity investor had a 20-year average annual total return that was 4.20% less than the index, directly related to poorly timed decision-making.* Take the emotion out of your investment strategy by doing these five things when markets get choppy: 1) Know your history Since 1900, there have been 35 declines of 10% or more in the S&P 500. Of those 35 occurrences, or “corrections” as they’re sometimes called, the index fully recovered its value after an average of about 10 months. With that perspective, if your investing time frame is years or even decades from now, it may be best to sit tight and stay invested. Of course, recent fluctuations have not put us in correction

August 21, 2015 No Comments

Seven ways to handle a market correction

Now that we stand six years removed from the Financial Crisis that preceded the current bull market in stocks, let’s understand how to react when a “correction” eventually occurs. Financial markets are characterized by long cycles with many ups and downs. The successful investor blocks out fear and sensationalism and recognizes that these market cycles are part of investing. In practically every bull market of the last 40 years, the U.S. stock market has experienced a correction during its rise. Read on for 7 ways to deal with the next one. In 2009, many investors were cashing out of the stock market. Things had been choppy for almost two years, and recent performance led them to behave as though the market was going to continue to go down. However, many of those who stayed invested saw stronger than average results over the next few years. In fact, since March 2009, the Standard & Poor’s 500 Composite Index is up more than 200%, making this the fourth-longest bull market in history. The year 2013 alone saw 45 new record highs in the S&P 500, so an upcoming correction in this current bull market may be due. What should you do? First,

April 23, 2015 No Comments

What a government shutdown could mean for markets

Markets are under pressure as a budget battle in Washington threatens the first government shutdown in 17 years. The inability of lawmakers to compromise on fiscal matters and their tendency to squabble right up to key deadlines has investors on edge once again, causing volatility to spike. So, what might this mean for your portfolio? Where we are “The inability of government to hammer out a budget agreement has created a headwind for stocks,” says Azzad Equity Analyst Ahsan Raheem. “The budget debate coincides with the last trading day of the third quarter, the beginning of third quarter earnings season, and another potentially contentious debate over raising the debt ceiling.” Adds Raheem, “All of this is happening against the backdrop of concerns the Federal Reserve may soon end its bond-buying stimulus, which is arguably the biggest market mover of all.” “However,” Raheem notes, “the market consensus is that a shutdown probably won’t last that long.” He and others have opined that once legislators start to hear about the impact of the shutdown on their constituencies, including the hundreds of thousands of government workers who will be furloughed, the tenure of any shutdown could be short. What to do Although the

September 30, 2013 No Comments