Better market days are coming. It’s just a matter of when

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Multiple days of losses may tempt some stock investors to sell and run for cover.

But that’s exactly what you shouldn’t do.

The reason: Days when stocks suffer big losses are often followed by days when they recover. If you sell, you may miss out on the upside — and that will cost you.

“Weak days are followed by very, very strong days,” said Jordan Jackson, global market strategist at JP Morgan. “These strong days are really, really important for weathering the fickle storm.”

On Tuesday, the S&P 500 index and the Dow Jones Industrial Average were poised to try to recover from the sharp sell-offs that led to six and seven-week losing streaks, respectively.

The S&P 500 is down about 15.9% so far in 2022, while the Dow is down 11.3% so far this year.

Still, according to Jackson, even the biggest swings indicate the need to stay the course.

On April 29, the worst day for the S&P 500, the market lost 3.6% on the day. Then, five days later, on May 4th, you had your best day with the market rallying 2.99%.

Additionally, on March 7, the S&P 500 was down about 2.95%. Two days later, on March 9th, the index rose by 2.57%.

The best days and the worst days often coincide, Jackson said.

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“Trying to time the market is likely to cause you to miss some really, really good days,” he said.

Staying the course has also proven to be a more profitable strategy during the pandemic.

Take an investor with $100,000 who sold when the market was down 18% as the Covid-19 outbreak began to shock markets.

If they had come back six months later, Jackson said they would have just broken even as of last week. But if they had stayed the course, they would have about $125,000 today.

Admittedly, after last year’s low volatility, where the maximum drop was around 5%, recent market declines could be hard for investors to digest.

But normal declines are typically around 14%, Jackson said, meaning the turbulence markets are experiencing now is normal.

Investors may also be aware that there are many positives from an economic perspective at the moment, including strong labor demand and low near-term recession risk.

But as the outlook looks bleaker 12 to 18 months from now, volatility and sell-offs in markets have increased, Jackson said.

While it may be tempting to hold more cash in your portfolio, it’s not an ideal move given inflation is expected to top 5% this year and 3% next year.

“Cash will continue to weigh on the portfolio if inflation remains very high,” Jackson said. Better market days are coming. It’s just a matter of when

Gary B. Graves

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