Stocks come to a choppy close in last moments of trading in 2021

Nancy Daoud, private wealth advisor at Ameriprise Financial and Terry Sawchuk, founder of Sawchuk Wealth, analyze the market’s modest losses and overall performance in 2021 as the world heads into the new year.

Video Transcript

[MUSIC PLAYING]

ADAM SHAPIRO: OK, we are in the final lap of the trading session, final day of 2021. And to help us make heads and tails of what we’ve witnessed this year, we’re going to be steered by Nancy Daoud, Ameriprise Financial Private Wealth advisor and Terry Sawchuk, Sawchuk Wealth founder. Good to have both of you here.

Nancy, let me start with you real quick before we get to the closing bell. In a year where we’ve watched the S&P 500 go up 27– not sure where it’s going to settle, but up 27%, as a financial advisor dealing with laypeople like us, what’s the benchmark we should use to measure whether our advisors have steered us well this year? Should we use the S&P 500 as the benchmark, or is there something else we should consider?

NANCY DAOUD: Well, the benchmark has to do with how one is allocated. If you’re 100% correlated to the S&P, then you should be performing just as well as the S&P. But if you’re in a balanced portfolio, it’s very unlikely that you will do exactly what the S&P did because you will have other parts of your portfolio that correlate to other segments, such as Barclays or perhaps the Dow or NASDAQ. So it really has to do with how one is allocated.

But I think it’s going to continue. And we’ll have a pretty good beginning of the year. And the best advice I could provide would be to take some money off the table, take some money and run. It’s been a tremendous year, 2021. And this is a good time to take some profits and capture it so that it can’t be taken away from you.

ADAM SHAPIRO: I’m going to use your quote, take the money and run. And when we come back after the closing bell, I’m going to throw that to Terry. Is it time to take the money and run?

My favorite quote, which I butcher all the time, is that nobody ever became poor taking their profits too soon. But Terry, I’m going to set you up with that after the bell. So let’s take a look at where we’re setting up on this last trading session of 2021. And there you see it. You got the Dow now off about 48 points. The S&P 500 is probably going to settle down about 11, 12 points. And we’ve got the NASDAQ, it’s going to be off roughly 93 points.

But something to keep in mind, the sector performance this year. Jared just hit upon this. Going into the day, we were all green across the board in the sectors. For the year, everybody is up. One of the least performing sectors was consumer staples, up 15%. Utilities up this year about 15%. But then you look at real estate, that sector was up 44%. It’s been an incredible year, energy up 48%. Those two sectors leading the way. All right, put it in the history books. Here’s the closing bell.

[BELL RINGS]

All right, there she blows. That’s the end of 2021. So long, see you tomorrow. Hello, 2022. How are the wife and kids? We look forward to catching up with you.

Let’s see where we are going to settle today on these markets. The indices are going to go down. The Dow is going to be off less than a quarter of a percent but still off about 60 points. S&P 500 will settle down about 12, 13 points. NASDAQ will settle down roughly 96 points, a little more than half a percent.

So let me get back to the guests and talk about what we were just saying, take the money and run. Terry, we’re still up. I mean, that almost 27 and 1/2 percent on the S&P 500, it does seem like a good time to take money off the table. Would that be a mistake?

TERRY SAWCHUK: I think it might right now. And now, this is interesting, because I do think the market’s got momentum. And I think it’s going to shift next year. But the trend-following guys will tell you, you’ve got to let your winners run. And there’s probably still some room to go. There’s really no imminent danger.

I think there’s a lot going on in 2022 that we’ll get to eventually that is going to be maybe a little on the uglier side. But for now, I think you let the winners run.

ADAM SHAPIRO: Getting back to you, Nancy, when we talk about the winners, who do you think, what sectors, perhaps, in 2022 will be the winners? Where are we going to be running?

NANCY DAOUD: Well, to answer your question, I think that technology will still continue to do very well. Real estate will still continue to do well, maybe not as stellar as 2021. The health care sector, as long as the pandemic is ongoing– and we’ve had two variants this year, so who knows what next year will bring? That will continue.

But I’d have to say maybe not get out of the market. But certainly rebalance. Most sectors, most client portfolios have done so well that many of the risk profiles have drifted significantly. And it’s time to get back to the right balance that we started out with. I think that’s the prudent way to go. And certainly, that works much better in the long term, even if there isn’t one.

ADAM SHAPIRO: Terry, as we take a look– I am going to ask you a question, by the way. I see the big M behind you. So I know what you’re going to be doing tonight. But before I ask for your predictions, I’ve got to get your predictions for 2022.

When you talk about, there will be a pullback, you alluded to that when I asked you about taking money off the table. You can never time the market. How do I protect myself though, if I’m anticipating the pullback? What kind of balanced portfolio would I want to be looking at? Because a lot of us are just terrified of putting any money into bonds.

TERRY SAWCHUK: Yeah, so we don’t really hold much in the way of bonds. So here’s the thing. I think I don’t agree with the statement that the market can’t be timed. I mean, you’re never going to catch the absolute top or the absolute bottom. But there are absolutely systems that you can use that will help you sidestep the major declines.

And one of the issues that you run into is if you go back to early 2020 during the COVID crisis when it first hit the markets or go even back to 08-09, everything correlates to one. So in the beginning, it’s the stocks. But then when the problem becomes larger and you get margin calls and other things and a cascade of leverage that comes crashing down, the bonds get sold off too.

And so I think you have to have a mechanism to avoid all that and go to cash or treasuries. That’s really what’s going to help you hold up in these really bigger downturns.

ADAM SHAPIRO: The downturns are what make all of us kind of nervous. And Nancy, having a balanced portfolio protects you. But is this going to be the kind of downturn, when we do get the correction, that most of us have lived through those once-in-a-lifetime events now three times in just the last 20 years. Is it going to be the 10% to 20%, or are we going to have a fourth once-in-a-lifetime event, do you think?

NANCY DAOUD: Of course, it’s hard to predict. If I knew that, it would be very, very easy. I don’t agree that we can predict the market. I think there is truly a methodology. There is a method to the madness. But in the end, it’s still madness, because almost anything could happen tomorrow. And that could change everything that we’re talking about.

So my feeling is we always have to be prepared, no matter what. And prepared means that we are allocated properly for the time frame and the appetite for risk that we are willing to take. So how balanced that is is going to be different for each individual.

ADAM SHAPIRO: But when you talk about the homeowner’s Nancy that you know investors need to have not necessarily on their house but in case their portfolios start to burn down, if I were your client, and I’m very nervous because I’m the Droopy Dog with the umbrella over my head all the time, how would you advise the risk-averse who want– I’m seeing these gains this year. And it’s like, give me my money, and I want to go home.

The money’s not going to do anything though. How do you convince me, eh, you still need to grow it?

NANCY DAOUD: Well, anything that you’re going to spend in the next two to three years has no business being in the market at all. Any short-term funds that are going to be withdrawn or used for any purpose at all really should not be in anything fluctuating. It’s your later and much later money that is OK to have fully invested because, no matter what happens, whether it’s a 10% correction or a 20% recession or anything, it does fully come back eventually.

So as long as you have the time, then it’s OK. But if you’re short-term, you should not be in it in the first place.

ADAM SHAPIRO: Terry, I’m going to give you the final word on this. And then I’m going to get your thoughts on kickoff at 7:30. I think it’s 7:30. When you talk about risk appetite in 2022, do people still have appetite for risk, or is it truly going to be the kinds of people who like to pick stock, and the average investor has had enough?

TERRY SAWCHUK: I think, believe it or not, it’s central banks all over again. We’re going to have one of these inflection points. And I think the markets– there’s just a lot of evidence, Adam, to suggest that the markets are at the risk of a pretty significant drawdown. And the question is going to be again, will the Fed step in or the central banks step in and fire the bazookas?

This has been going on since, really, the year 2000. And the central banks, without fail, have come in and done this. However, we’re getting to the place where it’s harder for them to do that. And so 2022 could actually be the year where they kind of step away from trying to drive asset prices up. And if that’s the case, your balanced portfolio is not going to help you, in my opinion.

ADAM SHAPIRO: Terry, and then a thought about the game tonight, $9 trillion on the balance sheet. Is that also, $9 trillion, the spread that you’re expecting for people today? Anything want to say to your fellow fans? Our director’s son is a student at Michigan.

TERRY SAWCHUK: All I’m going to say is happy new year and go, blue.

ADAM SHAPIRO: Nancy, I got to let you get in on this, because I’m not sure what school you went to. You don’t have anything behind you. But any final thoughts?

NANCY DAOUD: I went to UConn!

ADAM SHAPIRO: University of Connecticut?

NANCY DAOUD: Absolutely, yes.

ADAM SHAPIRO: All right, both of you have a wonderful new year. And thank you for joining us, Nancy Daoud, Ameriprise Financial Private Wealth manager advisor and Terry Sawchuk, Sawchuk Wealth founder.

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