5. Differentiate Between the Stock Market and the Economy. Stocks tend to bottom several months (historically, at least) before the rest of the victims of a recession. The end of the bear market may occur despite bad news on profits, GDP, and payrolls. The turning point in markets often comes when the news becomes “less bad” than investors fear or when worst-case scenarios become less likely. In other words, “Things are not as bad as they were projected to be”!
For example, during the early days of the pandemic, markets rebounded strongly after the Fed took decisive action to prevent a liquidity crisis from becoming a solvency crisis and fiscal spending provided support to struggling households. The infusion of money to the everyday household increased the supply and like other factors and with pricing increases, a solid work force; we have increased inflation.
So, in this current environment, the removal of worst-case scenarios regarding inflation, Fed policy, war and mid-term election results could be what turns investor sentiment from pessimism to optimism. It will give you the ability to keep your Financial Lifestyle on track. Struggling with financial pessimism? Allow me to help you through it.
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