When Will The Stock Market Turn Around? The Answer Might Be Hiding In Plain Sight.

“The portfolio has been treading water” and “When are we going to see a turn around?” have been frequent comments from my clients, and almost every other financial advisor I talk to on a regular basis has been hearing the same!

Yes, that’s true. Portfolios have been up, down, up, down, up, down…and it can start to make a person feel sea sick watching their money riding the waves.

A lot of that up and down movement has been because the Federal Open Market Committee (FOMC) led by Jerome Powell has been aggressively raising interest rates to get inflation back down to a manageable level. When we’re in a time like this where interest rates are rising, the financial markets tend to do this up, down movement based on what it perceives as “good news” / “bad news”…every news headline gets traded on, and no shred of news is safe from scrutiny!

In contrast, when we’re in a bull market and everything index is rising, the stock market can sometimes seem impervious to “bad news”.

When are we going to see the stock market take off again? There are no promises when it comes to the global economy, but we can look at statistics to see what has happened in the past! (Perfect example: The outlier in this chart, May 2000, encompasses both the “dot com bubble burst” in 2000 AND the September 11, 2001 terrorist attacks.)

---

---

The Bloomberg chart shows that the S&P 500 tends to rally, Big Time, when the FOMC stops (or “pauses”) raising interest rates. If you look at the bottom of the chart, the average return 12 months after the pause is around 19%!

When is the FOMC going to stop raising interest rates? We don’t know for sure, but it could be within the next few months (from today’s date of March 29, 2023). And when that pause happens, the stock market could take off quickly.

“That’s a lot of could’s and should’s and we don’t knows…”

Yes, it is!

It’s the nature of a collective system that is both highly individualistic and, paradoxically, has a hive mentality at the same time.

We can’t predict exactly what is going to happen in the financial markets, but we can use the wisdom from previous experiences and overlay the nuances of the current economic conditions to make educated financial decisions.

So, what do we do with this information?

• If you’re a money manager, you use it, and you communicate with your clients.
• If you’re a client of a financial advisor, you ask them to review your portfolio and make sure you’ve got the right mix of investments for your particular situation.
• If you’re a do-it-yourself investor, you do your own review and make an educated decision.
• If you don’t have a financial advisor and this all seems like a foreign language, but you want help making educated financial decisions, seek out a fiduciary financial advisor that helps clients just like you!

The current economic uncertainty has felt like navigating through rough waters in the financial markets, and we are all ready for things to feel safe and steady again. Sometimes, that means looking back at the data we have from the past, acknowledging our fear and uncertainty, and then making educated financial decisions based on the the information we have available to us.

---

Hannah Chapman helps entrepreneurs bring order to the confusion and chaos of business and personal finances as a Certified Financial Planner (CFP) and Money Mindset Coach with over 17 years of experience in the financial sector. As the founder of both X² Wealth Planning and Expansive CEO, she empowers visionary entrepreneurs to save wisely, spend joyfully, and support generously through tailor-made financial planning, bespoke investment management, and transformational money mindset coaching. Connect with Hannah online to learn more!