Is the Stock Market Correction Over?
It’s a question investors have been asking all year: when is this correction going to be over? The NASDAQ index is down more than 13% this year, and the S&P 500 is down nearly 8%. It has been the worst month for the US markets since March of 2020, at the beginning of the COVID-19 pandemic. The macroeconomic scene has been a nightmare for investors that have become used to bull markets and two years of a low-interest rate environment. Now, with the Federal Reserve hinting at its first hike as early as March, the US markets could see more volatility over the next few months.
But there is a difference between saying the correction is over and saying we are nearing a bottom. On Friday, the markets closed the week higher which always provides a sense of hope for investors. I’m saying, don’t get your hopes up quite yet.
Tech is Due for a Rebound
I understand that not every stock that falls lower will return to its previous highs. But for some stocks, we fully know that there is a solid business that has not changed during this correction. Has anything fundamentally changed about Tesla (NASDAQ:TSLA) to justify its 30% collapse this year? Wall Street analysts remain bullish, and as investors we need to understand that the markets will pull back over the course of time. As much as we thought that ‘stonks only go up’, they don’t.
Check out these other popular growth names that are incredibly sound businesses under the weakness of their stocks:
AMD (NASDAQ:AMD) down 30% in 2022.
Sea Limited (NYSE:SE) down 39% in 2022.
NVIDIA (NASDAQ:NVDA) down 24% in 2022.
Roku (NASDAQ:ROKU) down 35% in 2022.
Block (NYSE:SQ) down 32% in 2022.
Coinbase (NASDAQ:COIN) down 29% in 2022.
Nio (NYSE:NIO) 38% in 2022.
The list goes on with dozens of other stocks with similar losses. Were these stocks expensive in terms of forward-looking multiples? Maybe. But tech and growth stocks have always been speculative, based on the potential of the company in the future, not how unprofitable it is now.
It’s Time to Be Greedy
We might not be at the bottom, but we’re close. Watch stocks as they approach key support levels like the 50-day or 200-day moving averages. If you follow stock charts,you will see that over time, stocks generally retrace back to these moving averages before bouncing higher again. I am absolutely not saying to go all in now. But start picking your spots because I think some of these stocks are almost done bleeding. Remember, we need to be greedy when others are fearful, and the markets have not been this fearful in a long time.
Dollar-cost averaging is a great strategy when executed correctly. This does not mean buying a stock everytime it falls. It means watching the moving averages, support levels, and trendlines to make an educated investment based on how the stock has performed in the past. I know how frustrating the markets can be, especially when stocks of great companies like the ones mentioned above are bleeding every single day. Buy great companies and hold them for the long term.
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