Often times in the news, positive headlines sink to the bottom and the negative headlines float to the top. Such is the case regarding the economy and the stock market currently thanks to another high inflation report last Friday and three straight down days in the stock market.
With that in mind, I thought I’d send out a positive prediction for the second half of 2022 from a well-known bank, JP Morgan Chase. Their Chief Global Strategist, Marko Kolanovic, who successfully predicted the stock market bottom in March of 2020, is predicting markets will rebound to end the year flat.
The article and details are below, but he’s essentially saying the S&P 500 will rebound and recover the -22% that it’s lost so far this year.
The strategist believes that investors have been too pessimistic on overblown recession fears, noting that the consumer remains strong on the back of economic reopening.
He says, “The move in market prices is more than enough recession risk, and we believe a near-term recession will ultimately be avoided thanks to consumer strength, COVID reopening/recovery, and policy stimulus in China,” Kolanovic said.
Even more encouraging is that Kolanovic is not alone. Another strategist, Jeremy Siegel, is also optimistic over the next year and believes that investors in stocks today will not be disappointed a year from now.
While there certainly are predictions stating the opposite, it doesn’t benefit us long-term investors to focus on them. In fact, selling out and sitting in cash even for a few “UP” days can be incredibly detrimental to a portfolio. Listen to these statistics over the last 10 years:
- 8 of the 10 biggest up days happened within 1 month of the biggest down days.
- If an investor in the stock market missed the biggest 5 days they would have lost 32% of their total return over the last 10 years.
The bottom line is while the market continues to be dramatic and price in the worst-case scenario, it really does pay to sit tight.
Siegel mentions we’ve seen bigger shocks than what we’re seeing today with high inflation, and although we may still see volatility, we’re closer to the bottom than the top at this point.
He’s right, we have seen bigger shocks. One of the bigger shocks I’ve seen was during 2008-9. The wheels were coming off the financial system back then and the fear was a total collapse of the banking system. Today we suffer from concerns stemming from higher prices. Serious enough for a pullback, but not serious enough to ruin your summer.
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