Most market forecasters expected 2022 to be a volatile year for financial markets, with the COVID-19 pandemic subsiding and the Federal Reserve beginning efforts to cool off an overheated economy. The new year has already delivered wild swings in the stock markets, and not just over weeks, but intraday too.
This volatility is expected to continue for some months, especially because the Fed shouted out loud to raise interest rates to cool off the economy and containing inflation.
If you’re a long-term, buy-and-hold investor, your best bet is to sit tight. Add to your portfolio, when stocks are on sale. Corrections don’t last very long. In general they last 54 days on average. Bear markets are worse for stocks, but are also short-lived in the long term picture. If you have a few years to sit out stocks to recover, then you shouldn’t be panic-selling.
If you’re a short term trader, then it is happy days. Traders, especially day traders, love volatility. They try to take advantage of this volatility and they see opportunities when stocks rise and when they fall.
Sven Franssen