No doubt, 2022 was a painful year in the stock market. From January through October, the S&P 500 was down 25%. It recovered slightly in the 4th quarter to end the year down about 20%. This was one of the worst years since the Great Financial Crisis of 2008. The market reacted sharply to the Federal Reserve increasing interest rates at a rapid clip. Now that inflation seems to be easing, are we out of the woods yet?
It looks as if the market bottomed in October of last year and has been on a choppy ride back to where it started out in 2022. See below:
Recoveries are never perfectly smooth and more turbulence should be expected but this recovery is looking like many other recoveries of the past.
So far, we have basically completely round-tripped.
So what should we expect about the future?
In order to answer that question I went back through history to see how the market responded during previous times it was down at least 25%. See below:
As I always remind you, the past is not a guarantee of what the future has in store but it does a good job of giving us some context.
As it always does during bear markets, it felt as if the world was coming to an end and things were only going to get worse, but here we are.
Now, I’m not trying to say you should try to time the market by holding a bunch of cash to take advantage every time stocks fall.
Market timing is hard.
Predicting the timing and magnitude of bear markets remains nearly impossible.
My point here is that you don’t stop buying stocks during a bear market. If your plan says to rebalance, then you rebalance into the pain, even when it doesn’t feel comfortable.
You don’t panic sell during a bear market just because it feels painful to lose money. And you don’t make any rash moves when your emotions are high.
Bull markets don’t last forever either.
But it’s important to remember that bear markets are temporary.
This commentary reflects the personal opinions, viewpoints and analyses of the Seaside Wealth Management, Inc. employees providing such comments, and should not be regarded as a description of advisory services provided by Seaside Wealth Management, Inc. or performance returns of any Seaside Wealth Management, Inc. client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Seaside Wealth Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results