Mitch's Mailbox

May 5th, 2022

Does Current Selling Pressure Make This a Good Time to Buy Stocks?

Share
Subscribe

Mark B. from Wilmington, NC asks: Good Morning Mitch. With all of the selling pressure that’s going on in the stock market lately, would you say now is a good time to buy? Or should I wait a little longer until things with Ukraine, inflation, etc. are better resolved? Thank you.

Mitch’s Response:

Thanks for writing. The stock market has been choppy in 2022 so far, and I’ve written before that we should reasonably expect volatility to continue. Not only is volatility normal and common in equity investing, but it is also the case that corrections tend to last anywhere from a few weeks to a few months. We’re very much in that zone at the moment.

Long-time readers of mine know I do not advocate for market timing. If the cash you have on the sidelines is meant for the long-term, i.e., to fund retirement or cash flow needs well into the future (10+ years), then I would say now is a fine time to invest. The U.S. stock market has retreated from highs, the growth outlook is stronger than many appreciate (in my view), and I see corporations growing earnings at a better-than-expected clip. I think it’s a good time to own stocks.1

Where Should You Invest Your Retirement During This Time?
​​​​
With so much market volatility, it’s harder than ever to produce current income from investments. For a stable and predictable source of income in retirement, we recommend a portfolio invested in stocks with a strong track record of dividends and dividend growth.

To learn more about how to use dividend-paying stocks in your strategy to potentially generate cash flow for retirement, check out our guide “Retirement’s Uphill Battle: Generating Income in a Low-Interest Rate Environment.”

If you have $500,000+ to invest, get our free Retirement’s Uphill Battle: Generating Income in a Low-Interest Rate Environment2 guide today.

There is another part of your question I’d like to address for whoever is reading – the idea that an investor should ‘wait’ until the environment is a bit calmer before investing. I see a fundamental problem with that approach, which is that the stock market does not wait for good news to rally. The opposite tends to be true more often than not, whereby the stock market outperforms when the “wall of worry” grows. You might see this framed in the financial news as the stock market is ‘disconnected from the economy,’ but that characterization tends to miss an important point. The stock market is not necessarily a reflection of the current economic climate and sentiment – it is a reflection of how the economy and corporations will look 6 to 12 months from now.

So, when you look out and see high inflation, escalations in the war in Ukraine, the Fed raising the benchmark fed funds rate by 50 basis points, etc., it is important to remember that the stock market has already priced in all of these factors. If it is widely known and discussed in the news, it does not have much pricing power in the stock market. Investors need to constantly look out several months into the future to ascertain where the economy and corporate earnings are going, not where they have already been.

One final note I will offer is that investors can use market volatility as an opportunity to review your portfolio and asset allocation, to ensure your investments are aligned with your long-term objectives. If your portfolio is allocated in line with your goals, then remember that short-term fluctuations in the market should not change your long-term strategy. That’s just the market being the market.

I also recommend the dividend strategy, like the one we manage here at Zacks Investment Management, a percentage allocated to fixed income, preferred stocks, and other categories like small- and mid-cap stocks. The point is to have many parts of the portfolio working towards your long-term goals, with a diversified approach also allowing you to potentially reduce risk (versus a dividend-only approach).

To learn more about how to use dividend-paying stocks in your strategy, I recommend checking out our guide “Retirement’s Uphill Battle: Generating Income in a Low-Interest Rate Environment.”3

This guide will help you learn more about generating cash flow and income with this strategy. Topics covered include:

If you have $500,000+ to invest, get our free guide by clicking on the link below.

Disclosure

1 Market Watch. April 22, 2022. https://www.marketwatch.com/story/waiting-for-the-perfect-moment-may-not-be-the-best-strategy-3-things-americans-can-do-right-now-as-stock-markets-plunge-11643047617?mod=personal-finance

2 ZIM may amend or rescind the guide “How to Build Your Ultimate Retirement Portfolio” for any reason and at ZIM’s discretion.

3 ZIM may amend or rescind the guide “How to Build Your Ultimate Retirement Portfolio” for any reason and at ZIM’s discretion.


DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.
READ PREVIOUS
Is the Era of Strong Stock Returns About to End?
READ NEXT
Job Openings and Quits Hit Record, Fed Raises Rates, Mortgage Rates Climb

Explore Zack’s Archives

View
Mitch on the Markets
May 16th, 2022
Market Volatility Persists—But Economic Fundamentals Are Solid
Read more
Private Client Group
May 16th, 2022
Persistent Market Volatility, China Lockdown’s Impact, Mortgage Rates Rise
Read more
Mitch's Mailbox
May 11th, 2022
Should Retirement Investors Sit Out This Volatile Market?
Read more
Mitch on the Markets
May 9th, 2022
Does the Economy’s Contraction in Q1 Signal a Recession?
Read more
Private Client Group
May 9th, 2022
Job Openings and Quits Hit Record, Fed Raises Rates, Mortgage Rates Climb
Read more
Mitch's Mailbox
May 5th, 2022
Does Current Selling Pressure Make This a Good Time to Buy Stocks?
Read more

Daily financial tips directly
from the Zacks family.

Top

Search

Contact

I'm a Private Client I'm a Financial Professional