My Reflections on the Stock Market in 2021

My Reflections on the Stock Market in 2021

Posted On December 29, 2021 11:40 am

We know the calendar year is a somewhat artificial construct to mark the passage of time.  Although it may be arbitrary,  having a time segmentation serves a useful purpose; allowing us to measure and compare events over consistent units.  Without it, record-keeping would be messy at best.  

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One obvious area is athletics; how fast can one run a mile or kilometer? Another is investing as yearly returns become the measure of success. But, it would be more beneficial to think in terms of eras or periods.  For example, we can think of the pre and post-four-minute mile to distinct periods.  However, there again the four minutes is somewhat arbitrary. 

Likewise, when we speak about 2021, most of us are thinking about what has transpired since March 2020 when Covid shut things down, some 20 months ago. And, we’re still in the midst of this period and it will only be in hindsight when we know we’ve moved into a ‘post-pandemic’ period. 

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Anyway, a digression on the semantics of time and space aside, it has been a wild year! 

Records have been broken, traditional investing rules thrown out the window, and the very concept of money is being reimagined. 

The trend over time has always been towards larger and faster.  However, the sheer size and speed of what’s happened in the investing world has been truly eye-popping.  From the noteworthy but-mundane fact that the S&P 500 Index (SPY) has hit 69 new highs in 2021 (with a shot at 70 and 71), to the insane valuations that some companies and assets have achieved — seemingly out of thin air  —it has left people scratching their heads. 

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It brings to mind one of the most famous and dangerous statements regarding investing, “It’s different this time.”  What I like to say is, “It’s always different.” 

Meaning, while the basic frameworks, such as the calendar stay the same, what occurs within them always changes.  

What I’ve learned in my 30 years of trading is that for me to be successful I need to maintain a consistent framework. But, I do need the flexibility to adapt to the changing conditions.  The bedrock of my framework is risk management.  If I can start with that as a sound foundation, then I can withstand, and hopefully profit, from any changes in the landscape, however wild they might be. 

Stay tuned, ‘cause the period could get a lot wilder in 2022! 

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About author

Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.