📖 How The Old Buy-The-Dip Playbook Is Dated And Dangerous
📖 How The Old Buy-The-Dip Playbook Is Dated And Dangerous
Economic uncertainty continues to affect financial markets, as it rightfully should, since, in the long run, stock prices follow trends in economic growth. Investors are wondering how high interest rates might rise, whether there will be a deep recession (or if we're in one already), when inflation might begin to recede, and if unemployment will tick up, to name a few. Unfortunately, speculation on these issues and how the Fed might react is widespread and has put the market on edge, resulting in sizable swings in both directions.
These market rallies and pullbacks have been driven by alternating hopes and fears around the Fed taking its foot off the brake pedal - so far, to no avail. Over the last few decades, many investors have been conditioned that "buying the dip" pays and that impulse is still there (old habits die hard), causing large counter-trend rallies. However, this playbook is proving to be dated and dangerous in this new regime of high macroeconomic uncertainty, financial market volatility, inflation, and interest rates.
Where do market expectations stand today, and how can investors avoid playing the guessing game driving markets?
We discuss in this episode of The Wealth Effect Podcast:
📉 Future Economic Projections
🏦 Major Global Central Bank Policies
📊 S&P 500 YTD Sector Returns
Matt Faubion, CFP®
Founder - Wealth Manager
Show notes and charts:
The economy and inflation are expected to decelerate over the next year
Central banks around the world are following the Fed's lead
Rising rates are having differing effects across sectors
The bottom line: The old playbook is proving to be dated and dangerous, and how investors react to these challenging times will significantly impact their financial situation. It is precisely in times like these when having a well-constructed wealth and investment strategy is paramount to increasing the odds of achieving long-term plans.
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