The volume of the reverse buy movement, together with the extreme speed and ease of Execution of Sell Orders, sent the market indices to lows worthy of comparison with large funds of 2018 and the mini-crash of 2020. The Sales volume, identified by the red areas, clearly demonstrates the ripple effect.
The consummation of the current correction may still reach deeper moves, however, we already have an idea of how low the market is.
In light of the above, please note below that we have already reached an acceptable bottom for average technology assets. Levels as low as 2016 and 2018. Rotations from Tech Assets to Value Assets, mostly commodities, may have been completed. Probably another rotation is already underway and the vast majority of individuals will be left with their problems in hand.
The background below is extremely important for individuals seeking to tame their psychological pathologies, still deficient. Everything will depend on the age of the subject, absolutely. Investors over the age of 60, on average, may not be able to withstand lasting corrections: mainly because of the limited time for positive returns in Growth Assets. However, these individuals will reap good results in passive income-oriented assets even in deep corrections. The amount of discounted shares will certainly influence your quarterly income.
Even in monstrous corrections of the S&P 500, the most blunt duration, during World War II, did not exceed 37 months – 3 years: 1946 – 1949. All income will depend on the psychological state. The financial market is definitely divided into:
98% mental state and behavior | 2% good choices
Note: Psychopathology is an area of knowledge that aims to study the psychic states related to mental suffering.
An interesting data is in the following table: since 2002, after the S&P 500 reached +1% gain in three consecutive days, the positive returns from the markets over the next 12 months were exceptional.
As for periods of global economic downturns, the average correction of the S&P 500 approaches 24% – a good index to watch out for. The peak of the biggest correction since 1949 was reached 30 months after it started.
Based on this data: every time there are announcements of deep recessions, absorb the “pain” in your psychological state for more than 30 months. Be ready for consistent contributions during this period, no matter how negative your portfolio is. By preparing the mind for the worst, any period of less than 3 years will be absorbed with great ease.
The following image demonstrates the investment classes and their historical returns between 1802 – 2012. Understand: regardless of the environment, economic or political, unfavorable; companies tend to transform their productive and profitable character. Its productive tendencies are not static, paralyzed. They are dynamic! They transform along with the environment.
Despite the last sharp correction, which we still don’t know if it’s over, the S&P 500’s valuation still remains at levels well above normal. Particularly, I suppose the S&P has yet to take a leap before a years-long deep correction.
The market is already pricing in a rising high in the US Interest Rate. Prior pricing dictates the economic future. However, I suggest not waiting for the right moment for everything to happen: it’s not like a cooking recipe.