There's no denying that stocks have had an incredibly volatile start to 2022, and more bumps in the road may lie ahead. Does this mean that investors need to adjust their outlook and expectations when buying stocks right now? In this segment of Backstage Pass, recorded on Jan. 10, Fool.com contributors Danny Vena and Rachel Warren discuss.
Danny Venna: Let's look at where we are now. As of December the 29, less than one-third of the U.S. stocks that went public in 2021, were trading above their offer price. That means two-thirds of the stocks that went public last year are trading underwater. Things have only gotten worse in recent months since the small cap techpocalypse that we've been seeing. Stocks has been beaten down, just brutalized.
Since the beginning of November, things started going down, and now, here we are a couple of months later and no end in sight. Rachel, what are your thoughts on just the the beating that stocks have taken in recent months? Does that affect your investing strategy at all?
Rachel Warren: Yeah, it's a great question. I think it's one that a lot of investors are focused on right now. When I look at what's been happening with stocks the last several months, in a way, I'm not surprised. I feel like it was only a matter of time.
I think some of it is, you have a little bit of normalizing of expectations from the height of the pandemic. We think about the stock market crash in March 2020 and the really record recovery time the market experience, I think it was 5-6 months, which was incredibly fast compared to recent crashes on record say in the last 50 years.
Then after that, we just saw this tremendous exponential growth, particularly in high-growth companies, in tech stocks. But I think there was a point at which you could reasonably expect, that wouldn't last forever. There would be some kind of a normalization there, and I think that's some of what we've been seeing. I think, as well as we're seeing record-high inflation continue, people are quitting their jobs in record numbers, that's impacting companies in a variety of ways.
I think we're seeing this impact companies in different ways and I think investors aren't really sure how to value some of the stocks that they were really set on earlier in the pandemic. I think that's some of what we're seeing with some of these tech companies, is we're seeing this broad shift, again, perhaps into a little bit of more value-oriented plays.
I think some investors maybe need to normalize their expectations a little bit, but I also think some of it is really just confusion about what are these companies really worth.
We're seeing this explosion in the metaverse, we're seeing an explosion in all these types of digital assets, and I think it is making investing an area that some retail investors are approaching with a little bit more of a speculative bent, and I think all of that is very much infused into what we're seeing in the market right now.
I'm not really changing how I'm investing. I will say as I approach stocks I want to buy in the new year, whether that be newer to the market stocks like Airbnb as well as tech stocks, I'm also looking at balancing some of those out with some more stable healthcare plays and dividend payers. That's the approach I'm taking as we enter 2022. But I think it'll be interesting to see what happens in the next few months.
Danny Vena: I think it's important what you said about normalizing expectations. If we go back and look, a lot of investors are looking at how these companies are doing compared to last year.
Last year was such an extraordinary one in terms of, gosh, so many industries you look at, e-commerce over the past couple of years, and you look at the payments segment over the last couple of years, cloud computing, streaming video have all exploded over the last couple of years since the pandemic.
If you go back and start doing these comparisons to where things were at 2019, it might be a little bit more timely considering the situation that we're in.
