The stock market is a hot mess. 5 experts predict what will happen

This story is part of Recession DeskCNET’s coverage of how to make smart money moves in an uncertain economy.

Investors were left to turn again this week as the stock market once again fell into bearish territory. Global uncertainty, high inflation And rate hikes marked a dizzying year for the market.

Now we ask ourselves: what comes next?

With inflation still uncomfortably high and another aggressive rate hike expected by the Federal Reserve next month, the market is likely to be in a bumpy run.

“Investors should prepare for greater market volatility,” said Mahesh Odhrani, certified financial planner and president of financial planning firm, Strategic Wealth Design.

The short-term fate of the market depends on multiple factors, so any predictions about what comes next are simply plausible guesses. The Fed has raised interest rates five times this year in an attempt to contain inflation. Now, a the recession seems more likely of a “soft landing,” according to Federal Reserve Chairman Jerome Powell. And while it’s impossible to say how deep this recession might be or how long it will last, such a recession is sure to inflict more pain across the board, including rising unemployment.

As experts point to a light at the end of the tunnel, the market usually gets worse before bouncing back. Here’s what five experts have said that is likely to happen when 2022 breaks even and we prepare for 2023.

Where experts predict that the stock market is headed

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Market uncertainty will persist.

“Investors and markets have so far underestimated inflation and the resilience of the US economy. Market volatility is unlikely to change in the next six months.” – Mahesh Odhrani, financial planner and president of Strategic Wealth Design.


close-up of financial expert Doug Carey

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Prepare for an official recession.

“The stock market will continue to be volatile in 2023. A recession is very likely in 2023, which means the stock market is likely to suffer further declines.” – Doug Carey, financial analyst and president of WealthTrace.


Headshot of financial expert Sonja Breeding

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A riddle game, at best.

“Anyone who tells you to know what’s going to happen, you should probably run as far in the other direction as possible.” – Sonja Breeding, CFP and Vice President of Investment Advisory at Rebalance.


Headshot of financial expert, Jeffrey Roach

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‘Reasonable returns’ are possible next year.

“If inflation eases due to the Fed’s aggressive actions, I think we will see reasonable returns in the stock market over the next year.” – Robert Johnson, professor of finance at Creighton University Heider College of Business and president / CEO of Economic Index Associates.


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A stock market indicator bodes well.

We are seeing that P / E ratios are much more in line or actually below historical averages for most things, which bodes well for the future. “- Kirill Semenov, CFP and wealth advisor at Intellicapital Advisors, LLC.

Expect continued volatility

If there’s one constant you can count on in the stock market right now, it’s volatility.

Do not anticipate many changes in market volatility in the next six months as the threats to economic growth remain the same, namely, the war in Ukraine, the energy crisis in Europe, global inflation and supply chain problems, among many climate disasters, Odhrani said.

And what happens with inflation will play an important role in market changes. For example, market volatility could decrease if inflation stabilizes and the Fed starts easing its rate hikes, said Sonja Breeding, CFP and vice president of investment advisory at Rebalance. But she also warned, “I don’t have a crystal ball. It’s pretty hard to tell.”

A recession is likely during the summer of 2023, which means the stock market will suffer further declines for a while, said Doug Carey, financial analyst and president of WealthTrace, a web-based financial and retirement planning software.

Although the performance of the US economy in the first half of 2022 fits the technical definition of recession – two consecutive quarters of decline – no official recession has yet been announced. However, the economy remains shaky and this is reflected in the current market performance.

While experts can provide some forecasts based on previous market trends, don’t rely too heavily on forecasts. “Anyone who tells you they know what’s going to happen, you should probably run as far in the other direction as possible,” Breeding said.

Signs suggest a market recovery next year

However, 2023 is not all doom and gloom. Historically, after inflation began to cool, the Fed began lowering interest rates and the stock market began to recover. “History shows that as soon as it becomes very clear that the economy is in recession, that is when the recovery begins,” Carey said.

“If inflation falls due to the Fed’s aggressive actions, I think we will see reasonable returns in the stock market over the next year,” said Dr. Robert Johnson, CEO of Economic Index Associates. At the same time, Johnson noted that any unforeseen circumstance, such as another wave in the pandemic or global conflict, can fail.

However, the latest data on price-to-earnings ratios are making experts feel optimistic. P / E ratios compare a stock’s current price to its latest earnings per share and tend to be fairly reliable indicators of where the market is headed. A high P / E ratio usually indicates a growing stock, although it could also mean a stock is overvalued.

“We are seeing that P / E ratios are much more in line or actually below historical averages for most things, which bodes well for the future,” said Kirill Semenov, CFP of Intellicapital Advisors. “No indicator paints the whole picture, but more tame P / E is generally seen as a better time to invest than buying inflated valuations.”

Investments move in an unstable market

The ups and downs are a normal part of the investment. In this current climate, experts recommend long-term investments, which offer greater chances to ride the waves. And with markets down, investing now could mean picking up stocks at a lower price.

According to experts, here are some tips for investing in the market.

Play it safe

Opting for low-risk, long-term investments spread across multiple companies or sectors can help diversify risk. Most investors should opt for an index fund rather than actively trading stocks, according to Johnson.

“Too many people believe active trading is necessary to successfully create wealth,” Johnson said. “The best strategy for most investors is to simply invest in a large index fund, mutual fund or ETF [exchange-traded funds]which traces the market trend. ”

Diversify your portfolio

Instead of putting all your eggs in one basket, try diversify your investment portfolioOdrani said.

“Stay diversified across multiple asset classes and sectors,” he said. “They say in baseball it’s all about singles and doubles. Diversification is about hitting those singles and doubles rather than trying to hit a home run. Diversification can make the long run smoother, especially in volatile markets.”

Don’t let your money depreciate in savings accounts

Although some high yield accounts they have started offering savings rates of 2% – 3%, most still hovering close to 0%. “Leaving too much money in bank accounts or money market accounts that barely pay interest can destroy savings,” Carey said.

While you should leave enough money in an easily accessible savings account to cover emergencies – between three and eight months of minimum expenses – any cash above this can be used better.

“If inflation is 7% each year and you have money in a bank account earning only 0.5%, almost 40% of the value of this money is wiped out in terms of purchasing power after 5 years.” Carey said.

Treasury bonds are one of the best ways to overcome inflation right now, according to Carey and Semenov. Treasury Inflation Protected Securities (TIPS), also known as bonds, and I bonds. another investment vehicle guaranteed by the Treasury, both offer savings rates above 9% right now, which can help protect you from inflation.

Wait for the ride

When you see so many stocks in the red, you may be tempted to sell your holdings. Avoid impulsive moves, Odhrani recommended.

“It’s painful and investors are nervous, but making rash decisions can hurt them,” he said. “We believe the best thing investors can do in crazy times like these is to stay calm, invest, diversify and focus on their long-term goals.”

Playing the long game, rather than jumping ship when stocks are down, can lead to higher returns in the end. “You never really know when the market will peak or dip,” Breeding said. Hence, investing a certain amount regularly can help you calculate the average of the overall purchase price, regardless of what is happening in the market.

Ultimately, Breeding hopes the US stock market will pull itself out of its slump.

“We have built our company on productivity and determination,” Breeding said. “I think it will continue into the future and strengthen the economy as it has historically.”

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