Part 2: How To Navigate The Stock Market In 2022

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Earlier this year, I outlined three things to consider when navigating the stock market in 2022. You can view that article at length here. Back then, stock prices had declined -15% from all-time highs set back in Dec. 2021. Fast forward to today, stock prices continue to seesaw and remain volatile as U.S. stocks are down roughly -17% year-to-date (as of July 20th), per the S&P 500 index.

With that said, this current market swoon enters its 28th week of price instability with no clear sign that markets will stabilize and rebound anytime soon. As a continuation of the article I previously wrote, here are three additional sentiments on how to maneuver through the rest of 2022:  

  1. Be Prepared For A Longer Drought

    1. The past decade has rewarded those who have bought when prices have fallen. Although there is a possibility that prices could start to recover here yet again, it may take a more prolonged period for stock prices to fully bounce back and make new all-time highs. The overall deterioration in stock prices like we have seen for the first half of this year is showing similar flashes to stretches as we saw back in 2000-2002 and 2007-2009. In those instances, it took stocks 25 months and 16 months, respectively, for the stock market to finally hit a bottom. By comparison, this time around we are only seven months into the current downturn. If the market does not bottom for some time, be prepared to ride out tedious stagnation or potentially steeper losses before things turn around.

  2. It Is Okay To Take A Loss

    1. If an investment you own has fallen in value and does not show signs of resilience, consider taking the loss and repositioning your capital elsewhere. This could also mean beefing up your cash position as a more conservative, temporary play. If the price of a particular stock or fund is consistently falling, the odds of it continuing to decline amid a turbulent market are elevated. Often, the best offense can be playing some level of defense.

  3. Nibble, Don’t Bite

    1. Do not try to be a hero and guess whether stocks have bottomed. Trying to predict when the market will officially base is a complete guessing game. Keep your purchases modest and look to add to your investments over an extended timeframe. This helps reduce the emotional toll involved with investing. A good rule-of-thumb is if you feel too elated when a certain investment you own goes up or feel too worried when it goes down, you likely own too much of that particular investment.

If you have any questions as it relates to your investment portfolio, please feel free to contact me directly. I hope you enjoyed reading!

Joshua J. Baird
Investment Adviser Representative