THE WEEK ON WALL STREET
Stocks pushed higher last week, led by big tech names and boosted by December inflation reports that were mixed but positive enough to shore up investor confidence in Fed rate cuts this year.
FACT OF THE WEEK
Less than a year after the unsuccessful launch of Nupedia—an online free encyclopedia—its successor, Wikipedia, goes live on January 15, 2001. As of January 2024, Wikipedia has more some 6.8 million articles in more than 300 languages.
Nupedia, which launched in 2000, marked a failed attempt by entrepreneur Jimmy Wales and philosopher and internet project developer Lawrence Sanger to create a free online encyclopedia with peer-reviewed and edited content written by experts. However, Nupedia’s process proved very slow: In the first six months, only two articles were published. Then, along came Wales’ and Sanger’s Wikipedia, which allowed anyone to write an article without review, generating massive growth: The website had more than 20,000 articles in 18 languages by the end of its first year and a million by 2006.
Wikipedia’s enormous, user-sourced information hub prompted immediate questions about reliability. Comedian Stephen Colbert put it like this: “Wikipedia is the first place I go when I’m looking for knowledge…or when I want to create some.”
In a 2008 appreciation published in The Guardian, author Nicholson Baker wrote: “Wikipedia is just an incredible thing. It is fact-encircling huge, and it is idiosyncratic, careful, messy, funny, shocking, and full of simmering controversies—and it is free, and it is fast.”
Stocks Rock And Roll
It was a rocky week that ended on a high note. Stocks rallied Monday after the prior week's decline. Tech shares led, with the Nasdaq posting its best day since November 14.
On Tuesday, stocks initially tumbled but recovered most of their losses late in the session. Stocks rallied on Wednesday ahead of inflation news the following two trading days. Stocks fell initially on Thursday in response to a hotter-than-expected inflation report, reflecting investor concerns about the certainty, timing, and extent of Fed rate cuts later this year.
On Friday, the start of earnings season brought mixed results from a handful of major banks. By close, stocks had recovered most of their losses, ending the week with solid gains.
FINANCIAL STRATEGY OF THE WEEK
Diversification, Patience, and Consistency
Regardless of how the markets may perform, consider making the following part of your investment philosophy:
Diversification. The saying “Don’t put all your eggs in one basket” has some application to investing. Over time, certain asset classes may perform better than others. If your assets are mostly held in one kind of investment, you could find yourself under a bit of pressure if that asset class experiences some volatility.
Keep in mind that diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if an investment sees a decline in price.
Asset allocation strategies also are used in portfolio management. When financial professionals ask you questions about your goals, time horizon, and tolerance for risk, they are getting a better idea about what asset classes may be appropriate for your situation. But like diversification, asset allocation is an approach to help manage investment risk. It does not eliminate the risk of loss if an investment sees a decline in price.
Patience. Impatient investors can get too focused on the day-to-day doings of the financial markets. They can be looking for short-term opportunities rather than longer-term potential. A patient investor understands that markets fluctuate, and has built a portfolio based on their time horizon, risk tolerance, and goals. A short-term focus may add stress and anxiety to your life and could lead to frustration with the investing process.
Consistency. Most people invest a little at a time, within their budget, and with regularity. They invest $50 or $100 or more per month in their retirement account or similar investments. They are investing on “autopilot” to help themselves attempt to build wealth over time.
Consistent investing does not protect against a loss in a declining market or guarantee a profit in a rising market. Consistent investing, sometimes referred to as dollar-cost averaging, is the process of investing a fixed amount of money in an investment vehicle at regular intervals, usually monthly, for an extended period of time, regardless of price.
Investors should evaluate their financial ability to continue making purchases through periods of declining and rising prices. The return and principal value of stock prices will fluctuate as market conditions change. Shares, when sold, may be worth more or less than their original cost.
If you have questions about investment strategy, give my office a call, and let's set up some time to talk.