Investors are shedding equities at the fastest pace since March 2020, pushing major indexes into correction. Many sectors are in an outright bear market, defined as a period of generally declining stock prices over a prolonged period. At the time of this writing, the S&P index is off 8% year-to-date.
In the last 30 years, there have been 16 instances of monthly declines near that magnitude, nine with the economy in recession. In the other seven, the average return two months later was 7.74%. There are traders and there are investors. The golden rule for investors: As long as a recession isn’t around the corner, stay bullish.
In these times of volatility, avoid the temptation to change your long-term strategy in the wake of short-term market emotions. If you feel you must make a change, consider tactical shifts to the mix of investments within your portfolio – the ratio of equities to fixed income instruments and implementing alternatives, for example. The key to success in any market environment is to set a long-term plan and maintain it.