Stock Market Insights: Ambush market

DR. RICHARD BAKER, AIF®, is the founder of and an executive wealth advisor at Fervent Wealth Management. https://www.facebook.com/Dr.RichardBaker

My dog thinks a 100-foot section of our morning walk is Ambush Canyon. Two unleashed dogs ran at her barking and scared her a few weeks ago. Now she gives that house the side eye every time we walk past it, even though she’s had only one bad experience out of a hundred walks this year. Investors who walked through 2022 are giving the market a side eye, too.

The market technically started a new bull market in the last few days when stocks rose 20% above the last bear market low point. But there are no parades or silly string celebrating the achievement because investors, like our pup, remember the ambush not long ago.

That market ambush lasted most of last year but was the worst in October 2022 when stocks were down 25% off their all-time highs and inflation was over 8% (it’s less than 5% now, according to ycharts.com.) It was a miserable time to invest, but things are much better now.

The market isn’t quite up to its all-time high, but it is 20% above its last low point (YahooFinance), even though everyone says a recession is just ahead. I don’t know if the bear market is over or if this is the start of a new bull market. The market is as unpredictable as a toddler who missed naptime. Up market, down market, up market, down market, up market, on and on.

No one can guess how high the up markets will go or how long they will last, and we don’t know how low the down markets will go or how long they will stay down. The reality is that a short recession is still likely in the next six to 12 months, but it will probably be a pothole in the road and not a ditch.

There will always be up-and-down markets to navigate. Longterm investors should have an investment plan built to ride out multiple up-and-down markets over the years. According to Yahoo Finance, historically, stocks have a long-term trend of going up, with a lot of short-term downturns along the way.

Our twelve-year-old dog had a victory this morning. Usually, as we pass by the “ambush canyon,” she walks quickly, continually looking over her shoulder at the scary house. But this morning, she stopped, stared at the house, and peed in its yard, leaving her mark. That’s dog speak for “you don’t scare me anymore.” Investors need to get to the same point where they can get over the emotions of a down market and enjoy the up markets more. I’m not saying go mark your spot in your financial advisor’s office but get to a place where you can tell the market, “You don’t scare me anymore.”

Have a blessed week!

www.FerventWM.com