It's the question that's on every investor's mind…
Will the market crash in 2022?
After stocks soared 27% in 2021, it's only natural to worry about when stocks will crash. After all, stocks can't go up forever. And there are a plethora of factors that could send the markets tumbling… There's inflation, record stock valuations, ballooning corporate debt, and of course, COVID-19.
Even with all these potential bubbles, my team and I don't think you need to hit the panic button just yet. In our opinion, there are still gains to be had.
Think back to 1999 and the early months of 2000 for a moment. It was an exhilarating time to be an investor.
You didn't need a fancy degree or any formal training to make money with stocks. All you had to do was close your eyes and pick out a random ticker, and there was a good chance the stock would be higher in no time at all.
Investors could do no wrong. And they were giddy because of it.
If you had any money invested during those years, you know the feeling I'm talking about… the feeling that you couldn't lose.
Many people began thinking about quitting their day jobs to become full-time stock traders. And just about everyone had a stock tip for you… from your mailman to your barber to the guy walking down the street. Heck, even your own mother probably asked you how she can get in on the action.
That is what a market top feels like.
Today, folks aren't quite as euphoric.
Sure, the market has had an incredible run over the past year and a half. But folks aren't "going all-in" on stocks just yet. That's the pattern that often indicates a market top, since it means there will soon be no one left to buy.
Instead, investors today are still afraid for various reasons. Right now, they're worried about the Omicron variant. But we've seen stocks swing wildly as the market processes information on everything from the pandemic to inflation to interest rates.
A market top doesn't have this much fear.
That's the main reason why we believe the market can finish the year up in 2022. There are still more potential buyers who will jump in when there's no more fear. And that will push stocks up.
In my Retirement Trader and Advanced Options services, I gave folks my 2022 market outlook. In short, we think stocks will finish the year higher in 2022. You'll want to be a buyer, not a seller.
But we also noted that it wouldn't likely be a smooth ride up. There will probably be a few bumps in the road – or a few market corrections.
The best way to describe our outlook is "cautiously optimistic." You'll want to have your money in the game, but you'll want to stick to proper position sizing and have stop losses in place.
Now, to be fair, we're not claiming to have a crystal ball. It's nearly impossible to predict what markets will do in any given year. We will always change our minds if the data changes.
But for now, with some fear still in the market, combined with a healthy and recovering economy… if we had to wager money about the direction of stocks in 2022, we'd bet that the market will finish higher.
While it's tempting to want out of the market today after such an incredible run in 2021, our best advice is to stay invested.
What We're Reading...
- Stocks rise to begin 2022, Tesla jumps 12% and Apple tops $3 trillion.
- U.S. banks tighten COVID-19 precautions as Omicron variant spreads.
- Something different: Antonio Brown no longer a Tampa Bay Buccaneer, says head coach Bruce Arians.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
January 5, 2022