I wanted to share an interesting graphic about trying to time the market when things are volatile.
5 Lessons About Markets
- Markets can keep falling for a lot longer than we'd like.
- Market bottoms don’t come with an all-clear signal, and missing the best days of the market can really shockingly damage your long-term growth.
- Don't panic and make sudden decisions. One bad decision can destroy years of good ones.
- But you only benefit from it if you can withstand the painful periods that come with the territory.1 Stocks historically deliver strong growth over time.
- You can't avoid all risks. You CAN identify them, manage them, and focus on what's in your control. (That's what I'm here for!)
Here's the bottom line: Reaping the rewards of long-term investing means taking the good times along with the bad. (In case you hadn't noticed - we are in the midst of the bad). The end of a bear market looks an awful lot like the middle, and investors who panic, sell, and miss the ride back up regret it. That’s because the best and worst market days tend to cluster.2 Sit the bear market out, and you’re likely to miss out on the whole play. (See graph above!)
Let's talk about markets for a minute. The most recent inflation data shows that it continues to persist near 40-year highs.3 This being the case, makes it very likely the Federal Reserve will again raise interest rates another .75 basis points in early November.4 Does that mean a recession is inevitable? By technical definitions, we are already in a recession - given the last 2 quarters of negative GDP growth. How long and severe a recession, is the question now. Are we past the bottom or are markets going to fall further? While we've had a severe market correction, it is quite possible we could see some further downside. I don't think we are completely out of the woods yet with the current volatility. Unfortunately, we won't know if we have reached the bottom until long after the current events are in the rearview mirror. However, the current uncertainty won't stop the media from churning out scary headlines and flawed predictions.
We're here, we're watching, and we'll be in touch as needed. Send us a message if you need some reassurance or have something you'd like to discuss. That's why you have us.
Matt Mellier, CFP® & Team HWC
Sources
1. https://equitable.com/retirement/articles/inflation-and-long-term-investing
2. https://www.hartfordfunds.com/practice-management/client-conversations/managing-volatility/timing-the-market-is-impossible.html
3.https://www.cnbc.com/2022/10/13/consumer-price-index-september-2022-.html
4. https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
Chart Source: https://www.putnam.com/literature/pdf/II508.pdf
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.