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YOU MIGHT WANT TO check your mailbox. Mr. Market has been sending around a book of discount coupons on some great index funds and individual stocks.
Twenty-two percent off the S&P 500’s closing high set earlier this year. Seventeen percent off the Dow Jones Industrial Average. How about a whopping 33% off the Nasdaq Composite?
Still kicking yourself for not scooping up Amazon’s stock (symbol: AMZN) in early 2020 when it was—adjusted for the recent stock split—below $100? Well, it’s almost there now. How about some Apple stock (AAPL) at $132, nearly 28% off its 52-week high? Or PayPal (PYPL) below $74, a whopping 76% price cut from a year ago?
Yes, it’s sale time in stock-land. We’re officially in a bear market and good stocks and index funds everywhere are selling at a discount, some even at fire-sale prices. We all knew it was coming. After all, markets don’t go in a straight line to Nirvana. We were overdue for a correction.
These are the times that try the souls of market timers but make investors’ eyes light up. Who doesn’t love a good sale? When the sellers are running to the exits, long-term investors rush in, looking to put to work that cash they’ve been holding on the sidelines. As they like to say on Wall Street, bear markets are when stocks return to their rightful owners.
Maybe you’ve been putting off getting into the market because it felt overbought. Maybe you didn’t buy during past market swoons and didn’t benefit from the sharp recoveries that followed, and you’ve always regretted it. Now is your opportunity. What better time than when stocks are selling at a discount?
Oh, but this crash is different, you say. Today, we have out-of-control inflation. We have a war in Ukraine. We have major global supply chain issues. Biggest of all, we don’t have the Federal Reserve throwing near-free money into the markets to stoke demand and job growth.
Here’s the thing: Every time the market crashes, it feels different, it feels unique, it feels like the world is coming to an end. Remember how it felt back in 2008 and 2009, when the subprime mortgage market collapsed and people were talking about the prospect of a global financial meltdown? Remember how it felt back in early 2020 when people around the world were locked in their houses, and it seemed like there was no way anyone would ever fly on an airline or take a cruise again?
Guess what? The world didn’t melt down 14 years ago. Today, people are rushing to airports and taking cruises again.
It’s part of our ancient lizard brain to always look for the worst. Sometimes, the lizard is right and the worst-case happens. Most times, it doesn’t. In between lies opportunity.
In every market swoon over the past two decades—the popping of the dot-com bubble in 2000-02, the Great Recession of 2008-09, the pandemic-fueled crash of 2020—I put money to work. The reason I was able to leave the workforce last year and go off to pursue a second-act career is largely because I invested during those past downturns.
Sure, it doesn’t feel good to be grabbing the knife of a falling market, not knowing where the floor is. But no risk, no reward. In the words of the great Warren Buffett, be fearful when others are greedy, and be greedy when others are fearful.
Is a 22% discount on the S&P 500 not enough to entice you to buy? So what is the discount where you’re willing to jump in? Twenty-five percent? Thirty?
It’s important to know your price. It’s also important to realize that, like an auctioneer, the market might give you your price—or it might not. Will you be kicking yourself if it doesn’t hit your 30% off discount price and takes off again to fresh record highs?
Market timing is hard. In fact, it’s impossible. I don’t have a crystal ball and neither does anyone else. But there’s one thing I’d be willing to bet on: The market will see fresh highs again. When? I don’t know. But it will.
I know this because I have faith in the markets, in capitalism, in the awe-inspiring ability of companies around the world to innovate and grow. If you don’t have that belief, you probably shouldn’t be in the stock market at all. But if you share my faith, check out those discount coupons in the mail. I’m going through my booklet right now and putting together a shopping list.
James Kerr led global communications, public relations and social media for a number of Fortune 500 technology firms before leaving the corporate world to pursue his passion for writing and storytelling. His debut book, “The Long Walk Home: How I Lost My Job as a Corporate Remora Fish and Rediscovered My Life’s Purpose,” was published in 2022 by Blydyn Square Books. Jim blogs at PeaceableMan.com. Follow him on Twitter @JamesBKerr and check out his previous articles.
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I started adding some Vanguard Total Index (TI) shares late this afternoon. I have no idea if we fall another 20 per cent or the bear market lasts another year. I suspect a lot of uncertainty will be answered come the second week of November – a mere five months away.
I don’t think uncertainty about the midterms is responsible for any of the current sell-off.