Don'tread furtherif you are ok with that. The rebound from the depths of pessimist sentiment will be wonderful to enjoy. Temper your emotions of fear & uncertainty for tomorrow. We got this, like many times in the past.
First off, we are technically in a bear market. Year to date S&P 500 has declined just over 21% * as we put pen to paper, the second in so many years (2020 and 2022).
It may feel like stocks will never go up from here again, perhaps they might even go down some more from here. Anxiety peaks during these times. Stress rises. I understand, I hear it from so many of you and once in a while feel it myself when the person in the mirror stares back asking why did we miss side-stepping this bear market? (Please refer to Fig. 1 below for context).
There's always a reason to panic in the stock market... if it's not a World War then it's a dot com bust, or a fearful 9/11 after that or the housing bubble or the financial crisis post that, or fears of a Eurozone collapsing or a global pandemic to top it all... something has us ready to take flight from the capital markets.
Every crisis feels different, surely this time the sky will fall on our heads. For the record we have experienced 26 bear markets since 1928 to yesterday**... yet our recovery record is 26 out of 26... a perfect score. Every single time human ingenuity and creativity propels the market forward from the depths of the bear market.
Said simply, if we miss just 40 best days in the market, then its better to put money in a CD and get CD type returns. So, for us to move portfolios to cash and wait out the bear market can be counterproductive for you, as some of these best days happen during recoveries from the bear market bottoms.
The chart below is a useful guide for our approach to current volatility and your future financial well-being. Take a minute to read thru. Time to be opportunistic?
This is a sentiment driven bear market where multiple perceived negatives (to list a few... high inflation, Fed raising rates too much or too little or too soon, goods shortage and prices rising, Ukraine War becoming a world war any day, China locking down cities, soaring energy prices, mid-term political rhetoric) have in our view pushed investor sentiment to extreme negativism while the actual economic reality including corporate earnings are relatively positive vs. expectations.
hen this gap between reality and expectations is bridged, the market will rebound in our view, which should be about mid 3Q- early 4Q'22
We continue to monitor your portfolios and look to take opportunistic positions as the market rebound.
Let me emphasize again, if we sell now, we will end up kicking ourselves, not tomorrow or day after or the next month but a year from now, 2 years from now.
Slow money will beat so called hot or smart money. Together.
Warm Regards... Team OneNorthStar