Analysts have predicted that more pain is on the way
Investor Concerns and Their Impact on Markets
Stocks are suffering from extremely poor performance this year. The S&P 500 started with its worst beginning since 1970 and is the third worst ever, having temporarily fallen into bear market territory last week, and the outlook becomes more bleak depending on which direction it takes.
Analysts’ Predictions Regarding Stock Declines
The extent of the stock decline depends on whom you ask, but analysts see it dropping between 7% and 15% before hitting a bottom.
Reasons for the Stock Decline
Stocks are being hit from multiple sides. Investors are worried about ongoing inflation, rising interest rates, extremely high fuel prices, and the war in Ukraine pushing the costs of oil and other commodities up. In the face of this barrage of challenges, most analysts expect continued declines in the market.
What Should Investors Do?
Analysts often advise people to stick to their strategies, regardless of market conditions. This is because timing the market perfectly is nearly impossible, and selling at the wrong time can be just as risky as buying at the wrong time, especially if you miss the chance to get back in. Between 2002 and 2021, the S&P 500 returned 9.5%. But if you missed the best 30 trading days during that two-decade period, your returns would only be 0.4%, according to an analysis by Charles Schwab.
Although many anticipate that negative market conditions will persist for several months, that doesn’t mean there won’t be some positive days. “The market is currently in a significant lag, and any good news can lead to a violent bounce in a bear market,” analysts at Morgan Stanley wrote in a note.
This can be confusing, as it doesn’t necessarily mean that the selling is over. Sometimes, such “quick recoveries” can result in rises that might seem like a return to growth, but quickly fall back again, according to Todd Son, a market analyst at Strategas Securities. This has already happened this year. By March 8, the S&P 500 had dropped by 13%, then it bounced back and by April 4, it had risen enough to be down only 4.5%. Then it fell again for five consecutive weeks.
Navigating such situations can be very difficult, according to Todd Son.
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Sources:
- Charles Schwab. “Doom and Gloom: When Will It End?”
- Hartford Funds. “10 Things You Should Know About Bear Markets.”
- Federal Reserve. “Stock Market Crash of 1987 | Federal Reserve History.”
Source: https://www.thebalancemoney.com/stocks-slide-as-market-watches-for-bears-5323293
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