Two steps forward, one step back

The S&P 500 is dropping for a second straight day, and crypto is losing its footing. The data and headlines haven’t changed much, yet the market’s mood randomly flipped late last week. It feels like everybody suddenly decided that the rally was over once the S&P 500 hit the 200-day moving average.

We’ve lived through some swift selloffs this year, and you can’t help but wonder if this is the beginning of another big drop. Nobody knows what the future holds, but we’re here to remind you that things may not be as bad as they appear. Inflation, which started this painful selloff, is finally slowing down. The job market and company earnings are holding up well, and the Federal Reserve has said it’s willing to re-think future rate hikes if the cracks start spreading.

Still, it’s hard to feel that things are really better, even if they’re potentially moving in that direction. Prices are still rising quickly, and the global economy is in a much more precarious position.

Two steps forward, one step back. That’s typically the rhythm after a major market crisis. We may have seen the bottom in this market, but that doesn’t necessarily mean new highs are coming soon. In fact, it’s taken the S&P 500 an average of two years to recover from every bear market since 1950. It’s a difficult pill to swallow after a decade of quick rallies in markets, but that’s the way it often goes.

Your best approach as an investor in this environment is to determine the right balance of growth and safety in your own portfolio. Today, more than ever, it’s important to zoom out and focus on your own goals. There’s opportunity in this market, but you may have to wait a little longer to see it blossom.

 

*Data sourced through Bloomberg. Can be made available upon request.