As the S&P 500 index continues to fall, the stock market has officially entered a Bear Market or an elongated period of stock recession. Since 1946, there have only been 13 total times the market has entered and stayed in a bear market, and during each of those times, the S&P 500 has fallen an average of 32.7%.
Many people attribute the decline of the stock market to the rising inflation with prices of everyday commodities soaring across the globe, with even everyday food items like beef up 16% and chicken up 13.4%. In response to this inflation, Fed Chairman Jerome Powell has vowed to raise interest rates as high as possible, but this has not proven to be a very effective solution.
Adding to the inflation and economic troubles is the war in Ukraine. With Russia controlling a lot of the world crude supply, the price of oil and other commodities has risen dramatically. In fact, shares of energy companies have been the only industry that has been positive in 2022.
With the markets being so uneasy, people need to remember that there is nothing fundamentally different about the companies that we are holding. With a loose monetary policy and staggering inflation, stocks are very unstable right now, but that only means that this is an opportunity for investors to scoop up shares of fundamentally sound companies for a discount.
Some of the biggest investing legends out there, like Warren Buffett, are still talking about how now is the best buying opportunity for investors. While a bear market may continue through the end of this year, why miss out on buying stocks at a discount today?
Every single time the market has gone into a bear market, it has fully recovered even more than where it was before. Thus, my advice for investors that are panicking from this momentary instability in the market is to continue to hold and reconsider your positions and make sure they are all fundamentally sound companies that have good balance sheets.