Kovar Capital: Where is the stock market headed?

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Hi Taylor: Feels like stocks have been surging for a while. Any indication that’s going to slow down soon? Will investors start dialing back and prepping for a market that’s less bullish? - Astrid

Hey Astrid: There have been a lot of money-making opportunities in the last year, that’s for sure. At the same time, parts of the economic recovery have been a little slow and we clearly can’t shake our way out of these pandemic snags. We’ll see more defensive investing while people wait for a big dip in the Dow and S&P, but that’s never the full story.

Defining “defensive investing.” Some might hear this and think it’s just referring to smaller investments or selling stocks and waiting to repurchase when prices fall. Instead, it usually refers to the type of investments people are making. There are certain sectors people consider safe or “defensive”—healthcare, real estate, energy production, etc. Towards the end of summer, we saw an uptick in those investments as people moved money from growth stocks to the steadier industries. The market can’t run hot forever, so a lot of people want to make sure they hedge their bets before things take a turn.

Finding our post-pandemic direction. An issue with traditional defensive investing is that we still have economies across the globe recovering at different paces and all sorts of hiccups with international trade. Economists have been trying to guess our recovery speed for a year now and they keep missing the mark—not because they’re bad at what they do, but because we’ve never done this before. So, of course there’s a standing assumption that a bear market is on the horizon, but maybe it’s going to come on more slowly, or maybe we’ll just blow right by it as our supply chains get reestablished.

Market versus real life. As we’ve seen over the past two years, the stock market sometimes just marches to the beat of its own drum. It took its hardest hit at the very beginning of the pandemic, well before workers and regular people felt the heaviest burden. Certain industries will power the NASDAQ and S&P even while other sectors falter. We’ll see good and bad jobs reports and people will react, but then the next shiny object will come along and give investors a bump.

Bull, bear, defensive or otherwise, it all goes back to my stock market philosophy: buy what you love. Changing times might have you using different products and services, so look into those companies.

Disclosure: Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. To submit a question to be answered in this column, please send it via email to Question@GoFarWithKovar.com, or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 759

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