When the stock market peaked on February 19th, the economy\nwasn\u2019t yet in a steep economic recession \u2013 but it was about to be. By the time\nthe federal and state governments had started asking Americans to limit travel,\nsocially distance, and stay home if possible (around mid-March), the S&P\n500 was already down around -30% and close to hitting a bottom.1<\/sup>\nRisk happens fast, but markets move faster. <\/p>\n\n\n\n The lesson for investors here, in my view, is a stark\nreminder that while most people assess and understand risk in real-time \u2013 based\non watching the news or reading the newspaper \u2013 the stock market anticipates <\/em>risks before they become\nwidely known. By the time most investors realize it\u2019s a recession and an economic\ncrisis, it\u2019s too late. <\/p>\n\n\n\n ______________________________________________________________________________<\/p>\n\n\n\n Trying to Time the Market Could Be Costly, Focus on Hard Data Instea<\/a>d<\/strong><\/p>\n\n\n\n Instead of letting news articles or fearful headlines impact\nyour investing decisions, I recommend making decisions based on data and\nfundamentals. To help you do this, I am offering all readers our just-released\nStock Market Outlook report. This report contains some of our key forecasts to\nconsider such as:<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more\nabout these forecasts, click on the link below to get your free report today! <\/p>\n\n\n\n IT’S FREE. Download the Just-Released July 2020 Stock Market Outlook<\/a>2<\/a><\/sup><\/strong><\/p>\n\n\n\n ______________________________________________________________________________<\/p>\n\n\n\n 2. Event-Driven Bears are\nScary but Lack Stamina<\/strong><\/p>\n\n\n\n Bear markets generally fall into one of three categories:<\/p>\n\n\n\n So far, this episode has followed\nthe patterns of an \u2018event-driven\u2019 bear market\u2014steep, but shorter and less\nsevere than structural and cyclical bear markets. I do believe it\u2019s possible\nthat this event-driven bear could evolve into a structural bear if the outbreak\nmaterially worsens and stimulus ends, but the jury is still out on both.<\/p>\n\n\n\n 3. Initial Jobless\nClaims are a Key Indicator for Recessions and Bears<\/strong><\/p>\n\n\n\n The two charts below look at initial jobless claims, which is\ndefined as a claim filed by an unemployed individual after leaving an\nemployer. The top chart shows the last year, and the bottom chart looks at a\nperiod during and after the Great Recession: January 1, 2008 to December 21,\n2009. The fascinating takeaway from both data sets is that the stock market\nbottoms at almost exactly the time when\ninitial jobless claims reach a peak. <\/em>This, in my view, is no coincidence \u2013\nthe stock market is picking up the signal that the worst of the economic crisis\nis over, even though it will take the job market years to fully recover. <\/p>\n\n\n\n Investors often have a hard time with this reality. How can\nthe stock market go up when hundreds of thousands \u2013 or even millions \u2013 of\nAmericans are still losing their jobs? The answer is that the stock market is\nalready looking ahead by six, twelve, even two years into the future. Just like\nthe stock market plummeted well before anyone grasped the full damage to the\njob market, so too does the stock market soar well in advance of the job market\nrecovering. <\/em> <\/p>\n\n\n\n Initial Jobless Claims,\nJune 2019 \u2013 June 2020<\/strong><\/strong><\/p>\n\n\n\n Initial Jobless Claims,\nJanuary 2008 \u2013 December 2009<\/strong><\/strong><\/p>\n\n\n\n 4. Technology is King,\nbut so is Diversification<\/strong><\/p>\n\n\n\n The pandemic made even more apparent a trend that was already\nwell underway: rapid expansion of the digital economy. Businesses and sectors\nthat had been slow to adopt technological upgrades, enterprise software,\ncloud-based systems, and remote work are all scrambling to catch up. Technology\nhelped soften the damage to the economy and the stock market, and are helping\nlead the recovery. <\/p>\n\n\n\n I\u2019ve noticed many investors looking to tilt more heavily to\ntechnology as a result \u2013 I\u2019d urge caution. Exposure to the Technology sector is\na crucial component of any diversified equity strategy, there is no doubt about\nthat. But now is a time to remember the merits of diversification as part of a\nlong-term strategy. In my view, pivoting heavily to technology right now puts\ninvestors at risk of making two classic investment errors at once: chasing heat,\nand shifting asset allocation when your long-term goals haven\u2019t changed. <\/p>\n\n\n\n Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n Above all, perhaps the most important lesson we can take away\nfrom the first six months of 2020 is a lesson we\u2019ve known all along: don\u2019t try to time the stock market. <\/em>Risk\nhappens fast, but the markets move faster. When investors try to react in a\ntime of heightened emotion, volatility, uncertainty, and a stream of negative\nnews, it leaves the door wide open to making critical mistakes. Diversification\nand a long-term focus are still king, but so is patience. <\/p>\n\n\n\n![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/image-1-of-3-1024x410.png\")
Source: Goldman Sachs3<\/sup><\/em> <\/figcaption><\/figure>\n\n\n\n![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/image-2-of-3-1024x395.png\")
![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/image-3-of-3-1024x395.png\")