Don’t guess the market, do not try to call a bottom. You only see the bottom, when it is made and too late. When stocks go up, how long do you wait for confirmation that this is not just a bear market correction but a new bull run? A week, a month or a year?
Investors believe they will see and recognise when the markets have bottomed. But this usually happens actually after the fact. And when they look back, of course they can see that this was the bottom! But reality is that investors are scared of putting money into the market right now. And this fact, is understandable.
But bear markets and recessions happen regularly. The good news is, they generally don’t last long. On average, bear markets last about 9 months. That’s all. The most recent one in 2020, the market fell 35% in a matter of weeks and recouped its losses within 5 months and went on to gain 32% in a year and 104% from the bottom. That was after an attempted overthrow of the U.S. presidential election and a global economic shutdown caused by the biggest pandemic in a century.
Have on mind that markets bottom once people panic, capitulate and sell out. We might not be at that point yet, but people are scared and disillusioned. You do not have to pick exactly the bottom. It is already good enough when you put your money to work near a bottom. At any point in the stock markets’ history, you would have done extraordinarily well when investing somewhere close to each bottom.
Convince yourself to buy some stocks when markets are tanking and the outlook looks demoralising. There is money to be made in these situations.
Sven Franssen