By Scott Blair
It would be nice to know that answer but when it comes to market timing one of Zoe’s favourite quotes come to mind: “You are either lucky or you’re wrong”. Big stock downturns are normal, albeit unpleasant. Since 1950, the S&P 500 index has fallen more that 20% from it’s high on 10 different occasions.
Some, including Warren Buffet, could argue at this time that it may be a good time to buy. He is putting his famous quote to work: “Be fearful when others are greedy and be greedy when others are fearful.” There are currently plenty of good deals. The point to be made here is that it is certainly not time to flee stocks. They tend to outperform other asset classes over long periods. Stocks represent businesses whereas bonds are just borrowed funds used for financing and commodities are stuff.
The problem is that the average investor can’t decide between elation and panic so short-term results are anyone’s guess.
Don’t Panic. It’s Time to Be Bold and Buy Stocks. Barron’s May 13, 2022
While it can be tempting to follow experts calling for a long drawn-out market correction, keep in mind their long-term results are pretty lousy. The average annual return for the S&P 500 since 1988 is 10.6%. Even now the usual indicators are still pretty good. Jobs are abundant, wages are rising and household and corporate finances look strong. We are recommending a long-term investment mix of 60% optimism and 40% humility. (This one has the potential of becoming a favourite quote too)
According to an article in Barron’s on the weekend, Morgan Stanley is not sure we have reached the bottom but they do think that some parts of the market are priced for upside surprises, including financials, energy, healthcare, industrials and consumer services, as well as companies linked to transportation and infrastructure.
Importantly, we continue to reduce risk on the fixed income part of portfolios as rates rise. Currently, we are also researching the viability of investing in what some think is the next run of emerging market success such as we saw at the beginning of the surge in the Chinese economy ten years ago, India. We will let you know more as we progress.
In the meantime, if you are uncomfortable with your portfolio position and would like to talk about it, that’s why we are here.
Photo by Andre Hunter on Unsplash