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Investors have been on a wild ride over the past year, and all of the stock market’s ups and downs can be nauseating at times. Currently, the S&P 500 is down around 20% over the past 12 months, and the tech-heavy Nasdaq has fallen by nearly 34% in that time frame.
Managing your investments through all of this volatility is often exhausting, so if you’re wondering when things will start to improve, you’re not alone. Fortunately (and unfortunately), there’s good and bad news about the future of the stock market. Here’s what all investors need to know.
Image source: Getty Images.
Many stock market experts will make predictions about where the market is headed, but in reality, nobody knows for certain what will happen over the coming weeks or months. The market can be unpredictable in the near term, as there are countless factors that affect stock prices.
That uncertainty can often make market downturns tough to stomach, but it’s normal. By focusing your efforts on making the most of a bear market rather than predicting when it will end, you’ll be well-positioned to take advantage of the inevitable recovery.
Nobody can say exactly when this bear market will give way to a bull market, but it will happen eventually. The stock market has an impeccable track record when it comes to recovering from downturns. While there are no guarantees in investing, it’s extremely likely the market will bounce back from this one, too.
The key is to maintain a long-term outlook. Stock prices could fall further in the near term, especially if we’re headed toward a recession, as some experts believe. But the market has seen worse and has always managed to recover.
Case in point: Over the last two decades alone, the market has experienced the dot-com meltdown, the Great Recession, the COVID-19 crash, and the current bear market — along with countless smaller corrections along the way.
^SPX data by YCharts.
Despite everything, though, the S&P 500 is still up nearly 160%. Given enough time, the market will very likely see positive returns, regardless of how severe its downturns are.
When we’re in the thick of a bear market, the last thing you may be thinking about is investing even more money. However, now could be one of the best buying opportunities of the decade.
Besides the brief crash in March 2020, stocks have been on an incredible bull run since the end of the Great Recession. While that’s good news for your portfolio, it’s also been a wildly expensive time to buy.
Right now, though, stocks across the board are essentially on sale. Even high-priced stocks like Amazon have seen their prices plummet by 50% or more. Many companies haven’t experienced this type of slump since 2008, and once the market recovers, it could be years before you can buy at discounts like this again.
By investing now, you’ll not only save money by buying at lower prices, you’ll also be setting yourself up for potentially lucrative gains once the market inevitably recovers.
For example, between 2007 and 2008, the price of Amazon stock fell by more than 65%. But if you had invested in Amazon at its lowest point, you would have seen returns of more than 935% within just five years.
Not all stocks will see these types of gains, of course, but high-quality stocks are far more likely to recover from periods of volatility. By loading up on these investments at a discount right now, you’ll reap the rewards when the market inevitably rebounds — regardless of what happens in the short term.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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