US stocks have been in a correction phase over the last few months and the Nasdaq Composite stock index.
Which is heavily weighted by tech stocks, and entered a bear market last week.
But, historical data tells investors that they shouldn’t panic in this market turmoil.
Experts recommend “buy the dip” even in the event of a recent plunge in stock prices.
The Nasdaq Composite has picked up slightly over the past week, but on the 14th it plunged into a bear market, down more than 20% from its November highs last year.
However, based on the data so far, those who bought in the big down market tend to be rewarded.
This is because stock prices often rebound throughout one, three, five, and ten years.
“Buying stocks in a bear market is generally a good strategy,” Ben Carlson, head of asset management for institutional investors at Resalts Wealth Management, said in his blog.
According to Carlson data, the Nasdaq Composite’s average return after entering the bear market.
There was 22% after 1 year, 52% after 3 years, 87% after 5 years, and 328% after 10 years. Have reached.
Mark Hackett, head of investment research at Nationwide, said last week’s stock rebound was “a sign that investors are ready to move to an optimistic mindset.”
Hackett has said that the current market is favorable to fundamentals and that stock prices are expected to rise further in the future.
JPMorgan Chase is one of the leading investment banks that has determined that this year’s US stocks are “still upside.”
JP Morgan said stock prices could rise 10% from current levels amid continued uncertainty due to the Fed’s policy rate hike and Russia’s invasion of Ukraine.
The Nasdaq Composite recently entered bear markets in 2018 and 2020 but recorded 37% and 73% increases the following year, respectively.
It is also up 235% compared to the time of the 2008 global financial crisis.
Moody’s Analytics Chief Economist Mark Zandi said there may be a “surprise upside” for US economic growth.
But, it’s all about how the Fed can quickly normalize interest rates without compromising economic recovery.
It says it depends. “As long as Russia’s invasion of Ukraine continues, recession and stagflation pose a serious threat,” he warned.