Stocks were volatile heading into 2022 as fears of rising interest rates, soaring inflation, and the ongoing pandemic weighed down on stocks. Global stocks took another hit when Russia invaded Ukraine on February 24. The U.S. stock market entered correction territory, which is defined as a 10% drop from its most recent peak.
Growth stocks entered into bear market territory, which is when stocks fall at least 20% off their highs. The Toronto Stock Exchange has faired a lot better with commodities like oil spiking. Meanwhile, traditional safe haven investments like Treasury’s, bonds, and gold are rising.
With so much volatility and uncertainty undermining investor sentiment, the big question is whether investors should sell their stocks and ride out the volatility, buy into the sell-off, or stay the course?
Should I Sell and Wait Out the Volatility?
History shows us that when it comes to major geopolitical events like wars, stocks rebound quickly after knee-jerk panicking. For example, in February 2020 the stock market experienced its fastest 30% sell-off ever. By August 12, the S&P 500 had not just erased all of those losses but it also hit a new record high. The 2020 bear market was the shortest on record and the recovery the fastest in history.
A lot of investors got burned by selling into the fear.
There are plenty of other examples. In 2001, it took stocks just 31 days to recover from the September 11 terrorist attacks and 189 days following Iraq’s invasion of Kuwait. What about the 1941 bombing of Peal Harbor? It took U.S. stock less than a year, 307 days, to recover.
Canadian and U.S. stocks are still down significantly since the start of 2022 and the Russian/Ukrainian conflict may continue to send shockwaves throughout the markets, but if the general idea of investing is to buy low, and market recoveries during geopolitical tensions tend to be quick, selling into a falling market might not be the best strategy.
For investors who missed out on the spring 2020 rally and have been waiting to take advantage of another pull-back, the stock market correction could present investors with a great buying opportunity.
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The Russia/Ukraine conflict has negatively affected virtually every asset class. Investors might want to sell into the falling market and cut their losses, but history shows recoveries are quick during geopolitical shocks. Some stocks do better than others during these kinds of recoveries. The trading professionals at Learn-To-Trade.com can show you how to spot market trends and profit consistently.
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