For long term investors, 2022 has been a painful year with the S&P 500 down 25% and the NASDAQ down 34%. Value stocks have done a little better; the Dow Jones Industrials being down 18.5%. International stocks are averaging a decrease of about 27%. The bear market has been triggered by a Federal Reserve which has been aggressively raising interest rates to counteract stubborn inflation. The market is already pricing in a mild recession. Currently, the economy is still hanging in there with all time low unemployment and consumers spending freely. Estimates for corporate earnings have come down but overall are still positive for the year. However, parts of the economy that are interest sensitive (most importantly housing) are showing signs of slowing.
The question is where we go from here. Short-term moves are unpredictable; however, the path of least resistance is probably down since the Fed will continue to raise rates. Markets tend to recover when the Fed stops raising rates but may bottom before that. However, for long-term investors with a three-to-five-year horizon, bear markets have always proved to be a buying opportunity. This market is allowing investors to buy stocks at lower values than have been seen for years. To take advantage of the current situation, patience is a needed commodity. As Warren Buffet has said: Be fearful when others are greedy, and greedy when others are fearful.
Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed.
This article represents the opinion of John D. Quimjian as of October 15, 2022. John D. Quimjian is an investment advisor representative with Physicians Wealth Solutions, LLC, a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risks and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discusses herein.