8 days ago • 2 mins
What’s going on here?
The main US stock index climbed its way out of a hole in record time.
What does this mean?
Stocks have historically notched higher over time, keeping pace with strengthening economies and company profit. That, though, is a fact easy to forget when markets are especially volatile and it seems as though stocks could plummet to undiscovered depths at a moment’s notice. Case in point: the S&P 500 index had dropped more than 10% between the summer and last month, with pessimistic pundits predicting that a new bear market had reared its head. Yet in just 16 trading days, the index broke a new recovery record to land only 5% shy of its all-time high. You know what they say: what goes down must come up.
Why should I care?
For markets: Grab your flip-flops.
It’s not just you: the last two years have been filled with extreme highs and lows. In fact, the S&P 500 has swung more than 10% in one direction 11 times since January 2022. That’s because investors are to-ing and fro-ing on whether inflation will come down to land safety without crashing economies, or stay relentless while economies suffer. Any evidence that makes them believe in one scenario will encourage them to buy stocks accordingly, and then one-eighty when the next update makes them change their minds.
For you personally: Keep your eyes on the prize.
If you have guts that even the spiciest taco couldn’t throw off, then you could use these swings to buy stocks when they’re down and sell them when they’re up again. But if you’re a mere mortal, that tactic may stop you from sleeping at night. Instead, then, you may want to sit tight on a well-diversified pot and trust in the market’s long-term prospects. After all, the S&P 500 managed to pull out profit upticks even over the last two years, and analysts are predicting a 12% pickup in company earnings next year too.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
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