Black Friday

Mike Zaccardi

COVID STRIKES AGAIN. The new Omicron variant found in parts of southern Africa was the reason cited for Friday’s stock market freefall. It was the worst day for the S&P 500 since late February. So far this year, the U.S. stock market has endured a 2% one-day drop on six occasions.

This most recent market plunge felt similar to declines in February and March 2020, making investors extra jittery and prompting traders to reopen their playbook from 22 months ago. Shares of travel companies and small-cap value stocks felt the brunt of Friday’s selling pressure. Vanguard Small-Cap Value ETF (symbol: VBR) had its worst single-day performance since June 24, 2020, closing down 3.5%.

Similar moves were seen in foreign funds. The popular—or notorious—Vanguard FTSE Emerging Markets ETF (VWO) is down almost 20% from its February peak. As travel restrictions reappeared in the news, Vanguard FTSE Europe ETF (VGK) pulled back to where it traded in April, while Vanguard FTSE Pacific ETF (VPL) ended the week at a new 2021 low.

Investors who diversified with bonds benefited as prices rose and yields fell. The 10-year Treasury note saw its biggest drop in yield since March 2020. After flirting with 1.70% earlier in the week, the 10-year Treasury finished Friday at 1.48%. Propelled by intense bond buying, Vanguard Total Bond Market ETF (BND) jumped 0.71% for its second-best day since early April 2020.

Feeling unnerved? While the narrative might be disconcerting, 2% to 3% stock market declines are normal and often occur a handful of times each year. It might even be a welcome development for folks like me, who plan to fund retirement accounts for 2022 as soon as January rolls around.

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