Image shows stock charts on a phone surrounded by a cornucopia and fall leaves symbolizing the Thanksgiving holiday. Title Reads: Weekly viewpoint: Your Guide To Talking Markets on Thanksgiving.

Your Thanksgiving dinner table may look a little different this year.

The pandemic has forced a lot of us to work #socialdistancing into our holiday plans, especially as cases climb to records again. This year, you may be enjoying your turkey outside at a shouting distance, or over Zoom with 50 of your closest relatives who can’t seem to figure out the mute button.

Some things will never change, though, no matter how you’re celebrating. You’ll probably have that one relative who pries into your dating life or makes small talk over the stock market. We’ve all been there, and it’s super awkward.

While we can’t help you with the relationship probing, we’ve got you covered with a guide to tackling the most common investing questions that might pop up. You’ll look like the family genius this holiday season!

The chart shows the Nasdaq 100 Index performance and the S&P 500 performance from January 2020 to November 2020, showing that tech stocks in the Nasdaq 100 have consistently outperformed the S&P 500 throughout the year.

“Is the tech bubble going to burst?”

Hold on, Mom. Who said tech is in a bubble? Sure, the Nasdaq has been on a tear for most of the past decade, and there may be some parallels to the early 2000s now, but not as many as you think.

Tech’s reign over the markets makes a little more sense these days. The FAANG stocks – Facebook, Apple, Amazon, Netflix, Alphabet (Google) – are well-established businesses, unlike some of the popular names during the Nasdaq bubble of 2000. They have some of the strongest balance sheets and biggest cash piles among S&P 500 stocks, and they’ve survived this crisis well.

Tech companies are also growth stocks that tend to benefit from low-rate environments.  And society is more online than ever now that we’re in quarantine. That won’t change any time soon. There could be a legitimate case for tech stocks over the next few years. Just because stocks go up quickly doesn’t mean they’re setting up for a crash.

“Is it time to buy stocks?”

That’s a tough question, Uncle Ed. Timing the market is a fool’s errand. But investing with a plan can be a good idea. There could be ups and downs over the next few months, but 2021 is looking better than 2020, thank goodness. Wall Street expects the economy to keep recovering. And an economic recovery usually leads to improved corporate profits and higher stock prices.

While there are no guarantees, what I can tell you is this: stocks have produced nice annual returns throughout history if you’ve stayed invested through the twists and turns. Try 8% average annual returns in the S&P 500 since 1950. And it’s best to start as early as you can because of this mathematical concept called compounding.

The chart shows S&P 500 annual returns and significant drops from 1980 to 2019 . The chart shows that the market tends to recover from deep declines quickly.

“What are the hot stocks these days?”

Hm, the hot stocks. That’s a loaded question, Aunt Martha. Hot stocks come and go, kind of like Aunt Kim’s boyfriends. And while tech stocks had a spectacular year, the tide may be turning.

Here’s a hot take for you. “Re-opening stocks,” like travel, energy and financial stocks, may be poised for a comeback after a miserable 2020. We may still be a few months away from hugging relatives safely, but the market is starting to look like it’s ready for the post-pandemic world. Value stocks, or the market’s slow-and-steady members, are thriving, while tech is taking a step back. In fact, value stocks are heading for their best month versus their growth counterparts in nearly 12 years.

 

“Are these market pops and drops here to stay?”

It’s hard to say, Dad. 2020’s market swings were historic. That 34% drop in March was one of the S&P 500’s fastest bear markets on record. Since then, it’s posted the second-fastest rebound back to record highs. Like this pandemic, that was probably a once-in-a-lifetime market event.

Sure, we got our fair share of swings last year, but that doesn’t mean we’re set to cruise now. Every year has its highs and lows, but did you know that the S&P 500 has gone through 32 drops of 10% or more since 1950? That’s about one every two years. It would actually be unusual to see a year without any bumps at all. The S&P 500 has fallen at least 5% during the year in 60 of the past 70 years.

Volatility is a feature of the markets, and it can be an opportunity for you to buy in at cheaper prices. Just be prepared.

Happy Thanksgiving from all of us at Ally Invest! We’re taking a break from the Weekly Viewpoint next week, but we’ll be back in December!

Callie Cox, Senior Investment Strategist, contributed to this article.


 
Speech bubble icon next to text "Expert Take"

Headshot of Lindsey BellLindsey Bell is Ally’s Chief Investment Strategist, responsible for shaping the company’s point of view on investing and the global markets. She is also President of Ally Invest Advisors, responsible for its robo-advisory offerings. Lindsey has a broad background in finance, with experience on the buy-side and sell-side, in research and in investment banking and has held roles at JPMorgan, Deutsche Bank, Jefferies, and CFRA Research.

Lindsey holds a passion for teaching individuals how to become successful long-term investors. She is a contributor at CNBC, and frequently shares her insights with various publications including the Wall Street Journal, Barron’s, MarketWatch, BusinessInsider, etc. She also serves on the board of Better Investing, a non-profit organization focused on investment education.


 
Headshot of Callie CoxCallie Cox is Ally Invest’s Senior Investment Strategist. In her role, she helps educate Ally Invest customers about the financial markets through engaging content and strategic initiatives. Callie has worked in financial research for her entire career, with stints at LPL Research, TABB Group and Bloomberg. Her work has been featured in Bloomberg, the Financial Times, Yahoo Finance, and Barron’s (among other publications). You can also find her on Twitter at @callieabost.


The opinions expressed here are not meant to be used as investing advice. For more information, visit our website.