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Elena Blanke

Mr. Paravati / Principles of Financial and Global Markets

Stock Market Portfolio Journal

My stock portfolio has not been performing well through the months of December and January due to the rising inflation and interest rates in the economy. Since the inflation rate has risen to 7%, my stocks have been performing horribly. It mainly has do with the fact that most of my stocks are high-growth stocks. High inflation and rising interest rates don’t positively affect high-growth stocks (Frankel), which is why my portfolio hasn’t been performing as well since it consists mainly of high-growth stocks. More specifically, inflation usually slows down economic growth and can cause most businesses and consumers to stop spending their money on technology (negatively affected DataDog). Additionally, because of the COVID-19 crisis, there have obviously been more supply chain constraints and labor challenges (Palmer).  This has been more of a challenge for companies that are based on retail foot traffic, such as Target and Lululemon. Management teams of both companies have noticed supply chain issues since some categories of goods/clothing have been understocked (Thomas). Another reason as to why my portfolio hasn’t been performing well is that more people have been going back into stores. Retailers have been reopening their doors to the public slowly as the pandemic has been easing down, which has been affecting companies that grow from money made solely online, like Amazon (Deagon).

After conducting research, I have decided that the best move is no change at all. Although my portfolio has not been performing well, I still believe in the fundamentals of all the businesses that I am invested in. High-growth stocks tend to be more volatile and more vulnerable to fluctuations in prices. The recent decline in prices are driven more by macro issues rather than specific business performance issues. For example, over the past month, Spotify hasn’t been doing well, but Spotify is the dominant market leader in audio streaming and is expanding into many other content areas (Reis). They are extremely popular. Additionally, DataDog is a software company that monitors system health and reliability of many of the top companies. Even though their stock has been down, the need for their product has not diminished. Cloud-based technology and the companies that rely on it continue to grow - DataDog benefits from that growth (Frankel). It’s too quick to completely sell these stocks, it’s better to hold on to them for longer since there is no indication of any slowdown in their businesses any time soon (Frankel).  Also, the Q4 results have not come out yet for companies and I would like to wait to see how these businesses have performed until I make more decisions. From a long-term perspective, there is truly nothing that has happened in the economy that changes my opinion on wanting to continue to invest in these stocks.

Works Cited

Deagon, Brian. ""Is Amazon Stock A Buy Right Now As Epic Battle With Walmart Escalates." www.investors.com/news/technology/amazon-stock-buy-now/.

Frankel, Matthew, and CFP®. "Here's Why CrowdStrike, Datadog, and MongoDB Were Under Pressure on Thursday." The Motley Fool, 13 Jan. 2022, www.fool.com/investing/2022/01/13/heres-why-crowdstrike-datadog-and-mongodb-were-und/.

Palmer, Annie. "Amazon Was the Worst-performing FAANG Stock of 2021 — Here's Why." CNBC, www.cnbc.com/2022/01/05/amazon-was-the-worst-performing-faang-stock-of-2021-heres-why.html.

Reis, Bruno, and Guest Contributor. "Spotify Stock: 3 Reasons to Buy It In 2022." MavenFlix - TheStreet Streaming, 3 Jan. 2022, www.thestreet.com/streaming/spot/spotify-stock-3-reasons-to-buy-it-in-2022.

Thomas, Lauren. "Lululemon Earnings Top Estimates, but Shares Fall After Retailer Cuts Forecast for Mirror Sales." CNBC, www.cnbc.com/2021/12/09/lululemon-lulu-q3-2021-earnings.html.

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Elena Blanke

Mr. Paravati / Principles of Financial and Global Markets

Stock Market Portfolio Journal

Over the last two months, my portfolio’s performance has honestly been all over the place. At certain points, all of my stocks were doing extremely well, while at other times, they weren’t doing well at all. During that time period, the economy had been dealing with issues of severe inflation, which caused the cost of wages and supplies to rise. Because of this, the restaurant industry’s profits and expenses were going up, their revenues were increasing (Linecker). Additionally, most of the other companies that I was invested in required a large retail footprint that was needed in order to achieve their growth strategies. Examples of companies like these would be Warby Parker, Honest Company, etc. People most likely had chosen to not go buy certain products in person because of the “unknown” factors of the new Omicron variant. Many questions arose and are still rising - does it cause an extremely serious or mild illness? Is it capable of outsmarting the vaccines? (Jacobs). Currently, the new Omicron variant of COVID-19 is a huge risk to global growth and inflation, which explains why most of my stocks have not been successful in these last couple of days. There have also been multiple labor market shortages and issues with people showing up to work because of these new COVID-19 variants (Egan). In fact, most countries have closed their borders again and there have been more restrictions put on air travel (Singh). Overall, the companies that performed the worst (Chipotle, Warby Parker, Honest Company, Spotify, and Beyond Meat), most definitely had to with the fact that the inflation rate increased dramatically in the economy and that there had been less in-contact interaction with buyers in store because of the growing issue of COVID-19.

After reviewing how my stocks performed, I made the decision to not invest in a lot of companies that are completely dependent on retail marketing because of the fact that the Omicron variant had such a large impact on most of my stocks that were dependent on it. However, I did choose to invest in Live Nation Entertainment because of the fact that businesses similar to these, such as Ticketmaster, are doing extremely well even during these very difficult times. Now, there is higher demand for concerts and other forms of entertainment as people are beginning to return to their pre pandemic lifestyles. Though this goes against what I previously said, I am willing to take this risk because of the fact that since there is such high demand for entertainment now, the demand is most likely going to grow higher in the future when COVID-19 gradually gets better (Strauss) - the economy will grow and benefit extremely well from these high demands (more money made). Also, in general, I decided to invest more in technology based companies since I wasn’t invested in a lot before and also because of the fact that in today’s society, our lives revolve around a screen (invested in Roblox and Data Dog). In my opinion, over the next few weeks, I believe that the economy still won’t be doing so well, simply because of this new Omicron variant and its negative impacts on the current performances of many companies - this is unfortunate because before this variant hit, the stock market was doing pretty well. For instance, The Dow was up 500 points (2%) this past Wednesday but then because of the recent news (the Omicron variant), it dropped down to 900 points by the end of the day (CBS News). Because of this, I got rid of Chipotle, Honest Company, and Warby Parker. They were already doing horrible before, which shows that they won’t be doing any better in the future weeks to come.

Works Cited

“Dow Drops 900 Points after First Case of Omicron Variant in U.S. Revealed.” CBS News, CBS Interactive, 1 Dec. 2021, https://www.cbsnews.com/news/covid-omicron-variant-dow-drops-900-points-after-first-u-s-case-revealed/.

Egan, Matt. “Here's How Omicron Could Make the Supply Chain Mess Worse.” CNN, Cable News Network, 1 Dec. 2021, https://www.cnn.com/2021/12/01/business/omicron-inflation-supply-chain-raimondo/index.html.

Jacobs, Andrew. “Omicron: What Is Known - and Still Unknown.” The New York Times, The New York Times, 30 Nov. 2021, https://www.nytimes.com/article/omicron-coronavirus-variant.html.

Linecker, Adelia Cellini. “Chipotle Stock Falls despite Strong Earnings.” Investor's Business Daily, 21 Oct. 2021, https://www.investors.com/news/chipotle-stock-chipotle-earnings-q3-2021/.

Person, and Kanishka Singh. “Omicron Covid-19 Variant Poses Risks to Global Growth, Inflation -Rating Agencies.” Reuters, Thomson Reuters, 29 Nov. 2021, https://www.reuters.com/markets/us/omicron-covid-19-variant-poses-risks-global-growth-inflation-rating-agencies-2021-11-29/.

Strauss, Lawrence C. “Live Nation's Stock Could Jump 50%.” Live Nation's Stock Could Surge 50% | Barron's, Barrons, 3 Nov. 2021, https://www.barrons.com/articles/live-nation-stock-price-pick-51635897670.