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Investing Lessons Learned in an Abnormal Stock Market

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  • (1:00) - Stock Market Lessons: Learnings From The Past Two Years
  • (4:45) - Navigating The Changing Conditions of the Market 
  • (10:45) - All Time Highs vs. Company Valuations 
  • (13:20) - Value/Income Investing Strategies 
  • (17:10) - Experiences With Manias and Bubbles: Bitcoin
  • (26:30) - Takeaways On The FANG Growth Story
  • (33:00) - Episode Roundup: BA, FB, AAPL, AMZN, NVDA, NFLX, GOOGL, BABA, SQ, TWTR

Welcome to Episode #165 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

In this episode, Tracey is joined by Zacks Associate Stock Strategist and the Editor of the Income Investor newsletter, Ryan McQueeney, to discuss the lessons they’ve learned about stock investing over the past 2 years.

It has been far from an “ordinary” stock market.

Two “Abnormal” Years

In 2017, stocks had one of their lowest volatility years ever. Looking at daily percentage moves, the Dow Jones Industrial Average had only 10 trading days with a +1 or -1% move. That’s the third fewest amount of days since 1901.

The S&P 500 was even less volatile. It only had 8 such trading days.

But then came 2018. And while the December correction got all the glory as one of the worst Decembers in decades, January and February also saw a sell off in the S&P 500 of 10.2%.

Lessons Learned Investing in an Abnormal Market

1.       Complacency: 2017 lulled a lot of investors into complacency about their stocks as the S&P 500 had no pullbacks and rose 21.8%.

2.       Market Psychology: It changes dramatically during pullbacks. Investors have to learn to ignore the noise and invest for the long term.

3.       Valuations Do Matter: Boeing (BA - Free Report) traded as high as 29x before pulling back. Was it a sign that a correction was coming?

4.       Bubbles and Manias: The bitcoin and cryptocurrency craze at the end of 2017 was the first “real-time” bubble for Millennials investors. How many got burned?

5.       The Creation of FAANG: FAANG stocks and those associated with the group became the “it” stocks during the last 2 years. Was too much emphasis placed on them all being “the same”? There’s a big difference in the businesses of Nvidia (NVDA - Free Report) , Microsoft (MSFT - Free Report) , Amazon (AMZN - Free Report) and Facebook (FB - Free Report) . The Street acted like they should all trade in concert with each other. Facebook’s big pullback dispelled the myth of the FAANG collective.

What other lessons are there from the last 2 years that could help you be a better investor going forward?

Tune into this week’s podcast to find out.

[In full disclosure, the author of this article owns shares of AMZN and FB in her personal portfolio.]

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