Sponsored content by Guillaume Decalf from www.ouifinancial.com. First of all, each situation is different and the financial points can differ according to your personal situation. This article was written for informational purposes only and the opinions mentioned here do not constitute financial advice.
For those who are invested in the market or those who want to invest in the market, it is a difficult period. The decline in the market this year (-24% for the SP500 and -32.5% for the Nasdaq-100) is probably difficult to bear emotionally.
You will see this type of fall once every 7 to 10 years, around ten times in your life. This type of fall is not common, but it’s not uncommon either. It generally lasts 1 to 3 years, and then the financial markets will go up for 7 to 10 years.
See it as a great investment opportunity and keep putting money into your accounts regularly. This is not a problem of the market, it is a characteristic of the market. You cannot make good returns on investments without enduring declines here and there.
Seeing your money going down will feel like the equivalent of a physical attack.
This “attack” engages a “fight or flight” response for your brain – The “flight”
response tells you to get out of the market and secure your investments. The problem is that by doing this, you have gone down with a high risk profile and when the market goes up you will have a lower risk profile so you go back up less quickly. If you take your money out of the market now, when are you going to re-enter it (-30%, -40%?) and if we don’t go that low and the market goes up 20%? You will have lost 20% of recovery…
To conclude, what will decide whether you are a good investor or not is how you react in periods of storms. To quote Warren Buffet: “be fearful when others are greedy, and greedy when others are fearful”.
For the more technical part, here are the indicators that I follow…
The level of the SP 500. We are (October) at the same level as the market lows in June. As I write these lines, the SP500 is more or less at this level (around 3650). If the market continues to slide, the next support is at 3400, which is -7% from today, then 3000 and then the Covid lows. Nobody knows the future, but the probability that the market goes down to 3400 is more important than the probability that it goes back to the high.
If the war in Ukraine escalates, especially with the use of tactical nuclear weapons or the explosion of a nuclear power plant, the possibility of a 50%+ crash is possible. If inflation (excluding gas and oil) still does not decrease, a descent to 3000 (-22% compared to today’s level) is also possible. Once again, you must see this possibility as an opportunity, not as a problem!
The second indicator I keep an eye on is a more technical indicator that
represents the panic level of the market. When the panic is at its highest, it
means that we are, in general, close to the bottom of the market.
What’s the worst case scenario? If we compare the current situation to
2008/2010 – the biggest recession of the last 30 years – this is what the current level would correspond to… This is not the scenario that I favor for the moment.
If you have cash to invest, now is the time to deploy it over the next 6 months in the market. The outlook for investment in other media (real estate in particular) appears rather negative with the overall rise in rates and the price of real estate which is still at its highest, but is beginning to fall in certain cities.
To go further: https://awealthofcommonsense.com/2022/10/getting-long-term-bullish/
Guillaume Decalf from www.ouifinancial.com – email@example.com
After a 15-year career in the technology sector, nine of which in the United States, Guillaume changed careers by obtaining his license as a financial advisor and creating Oui Financial, a company specializing in financial planning and investments for French and Franco-American families in the United States. He is based in San Francisco, California, but serves clients all over the United States.
MerciSF is not responsible for the material contained in this article.