Instead Of Market Fear, Let’s Try Some Historical Perspective

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Smart investing means looking a few years in advance, not a few weeks.

Some of this was to be expected. Government spending is way down as the heavy rescue spending for Covid was gone. Much of that is hard to see, according to a fuller explanation “because the impacts are generally embedded in source data and cannot be separately identified.”

Still, let’s put GDP in a bigger pre-/post-pandemic context. “Real GDP for the first quarter of 2022 is 2.8 percent above the level of real GDP for the fourth quarter of 2019,” which was the last pre-pandemic quarter, according to the BEA. The country has recovered ground and is still on a path of expansion from those previous trends.

A look at stock movement will give some of that perspective. Here are graphs from January 1, 2015 and on for the S&P 500, Dow Jones Industrial Average, and Nasdaq, in that order.Federal Reserve Bank of St. Louis graph of the Dow Jones Industrial AverageFederal Reserve Bank of St. Louis graph of the Nasdaq stock index.There are ups and sometimes enormous downs, like during the pandemic crash, shown by the grey bars. Or like every major fall that happened in the past.

“First, the S&P 500 Index has closed higher during the month of May in eight of the past nine years—so “Sell in June” might be more appropriate,” writes the firm’s chief market strategist, Ryan Detrick. “In fact, stocks gained nine of the past 10 years during these six months … [so while] our guard is up for some potential seasonal weakness and choppy action, be aware it could be short-lived and consider using it as a buying opportunity.

 

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