The Big Question, Answered: Is Now The Time To Get In?
My first writing job was with the college newspaper. I was the Opinion Page Editor.
That meant I spent my time coordinating our editorials and guest columns as well as running Editorial Board meetings. But it also meant I had to deal with Letters to the Editor.
It can be a thankless job. For every astute observation from a reader, I bet we had a dozen complaints. Why didn’t we cover the equestrian team? Too biased with our coverage of the new Student Life center. Why were we being so critical of the football team (and its coach)?
But, hey, everybody’s entitled to their own opinion, right?
Thankfully, these days, the questions or comments I field are a lot more incisive.
In fact, I’ll give you one example straight from the mailbag. I’ll share it with you today (along with my answer), because I think it’s one that we’re all wondering right about now…
Q: With the market down so much this year, is now the time to get in? Should we focus on value stocks?
Many stocks are trading at lows in this market, which can look mighty tempting to investors. If you’re looking for “value,” it can seem like you have many more choices in bear markets than growth investors. After all, nothing’s growing… so what will they buy?
On the other hand, the market plunge we’ve seen so far this year has opened up a large menu of opportunities for value-minded investors.
Now, we’ve said before (and we’ll say it again) that nobody can time the bottom. But if you agree that we’re probably closer to a bottom than a top, we’re looking at a rare opportunity to make good money.
But let me offer a word of advice… Instead of looking for so-called “deep value” plays (which can easily wind up being a “value trap”), spend your efforts looking for dominant names trading at depressed prices. For example, a company like Alphabet (Nasdaq: GOOG) may be struggling right now, but do you really think Google won’t be around in five or 10 years?
Now, let’s tackle the first part of your question. Is now the time to get in?
A Little Market History Lesson
Some people thought the sky was falling in October 1987. But we recovered quickly. The same goes for the pandemic meltdown of 2020. And sure, the financial crisis was painful — it took a while to recover from that one. But we covered a lot of ground in the decade that followed.
The point is, as Buffett has pointed out repeatedly, the market’s very long-term trend is bullish. And as he has also said, it is not wise to bet against America. Just take a look at this 90-year chart of the S&P 500 to see what I mean (the grey areas indicate recessions)…
Source: Macrotrends
Investors of a certain age have seen multiple meltdowns in equity prices. Chances are, there will be more ahead, too. But we’ll also see some incredible rebounds.
As my colleague Jimmy Butts, Chief Investment Strategist of Capital Wealth Letter, recently pointed out, bear markets don’t last long. They may feel like an eternity, but they tend to find their bottom faster than you think. The average bear market lasts about 14 months, with a -36% drawdown. As of last month, we were at 9 months and -a 28% drawdown.
Closing Thoughts
So while I can’t say for sure if this recent surge in the market is the real deal, what I do know is this…
Years from now, the chances are good that we will all look back on this as a time of opportunity. Also, don’t forget that stocks almost always surge well before signs of economic improvement are visible. So don’t wait too long to act.
In the meantime, a furious competition is taking place to see who will take the top spot in the private space race. And investors have an opportunity to cash in…
Our latest report tells readers all about Elon Musk’s secretive project and what it could mean for the future of this burgeoning industry. And even though it is “off limits” to regular investors, we’ve uncovered a “silent partner” that’s tradeable right now and gets you in on the ground floor…