It’s not that easy to find a lot of bright spots in today’s market, and although a recession may be coming (or is already here), one of the most successful investors ever is still putting money to work. That seems like a bright spot to me. It doesn’t mean he’s bullish or believes the market downturn is over, but it does reinforce the most timeless bit of advice every investor needs to keep in the front of their mind. BUY. With a longer term perspective, it is usually the best to buy regardless of the year, month, or day.
But if a recession is coming, why should you buy into the market today and not wait for the recession? Historically, stocks bottom 6-9 months before the recession hits (1). Also, there have been many recessions throughout history that have not been recognized until they were over. If you want to wait for the recession to hit, then be my guest. If you think you are smarter than the market, then by all means…wait. Just remember with that strategy, you are betting against the house.
Did you forget the house almost never loses?
As counterintuitive as it might sound, I find this bear market (and those to follow) to be the best thing that could happen to anyone with a long-term time horizon. Would you rather buy equities when they are trading at all-time highs, or get them for a 20% discount? As the great Morgan Housell put it, “All past declines look like an opportunity, all future declines look like a risk.”
It feels crappy now, but there’s a reason great investors are great. They buy when others are fearful.
Disclosure: Michael Lafata is a Financial Advisor offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer, and a Registered Investment Adviser. Archstone Financial is not a subsidiary of nor controlled by Cetera.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. The views stated on this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be considered directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
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