Marc Cuniberti The question I get asked a lot lately is should investors go back into the market and is the crash of spring 2022 over.
Although no one forecast market direction at any time, there has been some encouraging signs. Whereas the first four months continually carpet slammed any “buy the dip” investors that dared venture back into the market, the last few weeks have seen some continual buying in certain asset classes, with some stocks off their 2022 lows and still going higher. Then of course Thursday and Friday hit. Yet another carpet slam. Raise your hand if you think it’s over.
That said, there are still many naysayers and analysts voicing warnings that the latest green shoots appearing in the markets are temporary bear market rallies. Bear rallies are the markets way of sucking in more dollars from the hopeful, only to crash again sometime later. Rinse and repeat and you have the quintessential bear market action that disheartens even the most persistent stock market enthusiast.
The Good, Bad and the Ugly of our current market environment:
The good part is some badly beaten up technology stocks are seeing some buyers. Other beaten up stocks in other industries are also rising from the ashes with some decent follow through. One has to admit, with some previous stocks down 70%, 80%, 85% or more from where they were a few short months ago, there may be some good buys to be had and indeed some investors are nibbling.
The bad part includes the history that bear market rallies can have stunning up days, with stocks running hot in one or two day “sucker rallies”. It is said the biggest rallies are bear market rallies. Additionally, the statistics coming out of the Bureau of Labor Statistics (BLS) show the economy getting weaker and inflation still burning hot and getting hotter.
The ugly, unfortunately, is very ugly. With inflation not yet cresting, and the worst in almost 50 years, many argue the Feds are still way behind the 8 ball in their policy response to it. With a half point interest rate increase already on the books, more increases are on the way. Some analyst believe overall increases totaling two or three percent, although radical by historical precedent, won’t be enough. Technically, if inflation is running 8%, the thought is real interest rates must at least approach that to quell the rise in prices. I can’t imagine what a Fed rate of 8% would look like as it pertains to its effect on the consumer and the economy in general.
In conclusion, if investors are experiencing FOMO (fear of missing out) and don’t want to be left behind should stock prices once again start to rise, prudency may be the best option. This means adding small amounts only, keeping lots of dry powder and other cash like investments in the rears, so if the markets once again start hard down, you won’t have over committed too much money and still have some left to buy yet again at even lower levels.
‘Watching the markets so you don’t have to”
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This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, SDSU, and California Insurance License #0L34249. His website is moneymanagementradio.com, and was recently voted Best Financial Advisor in Nevada County. 530-559-1214
