Market analysis | Caution is a trump card, but when should you return to the stock market?

The year 2022 has been miserable for the stock investor. The US S&P 500 index, which sways the world’s stock markets, has fallen by more than 20 percent this year, and the Nasdaq, which is focused on technology companies, has already fallen by more than 30 percent.

The price drop in developing markets has been just as drastic. Even in Europe, this year, stock prices are down by more than 20 percent since the beginning of the year.

Profits have been obtained this year by investing in the dollar, gold or Brent reference quality oil, the world’s largest asset manager Blackrock listed in its weekly review.

Central banks have raised interest rates around the world to counter inflation. Partly as a result, several developed countries are threatened with recession.

Investors are now feverishly thinking about at what point the rates will approach bottoms. Only then would it be a good time to increase investments.

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Whenever governments or central banks try to stimulate the market, inflation rears its head.

Central banks interest rate hikes have sparked a debate about how well the post-pandemic rise in prices, largely due to supply-side disruptions, should be curbed.

According to the monetary policy hawks, the decline of the economy and the increase in unemployment must be deliberately sacrificed in order to break the cycle of rising prices.

Monetary policy doves emphasize more the importance of employment and economic growth.

In their opinion, central banks should take more care of employment and economic growth.

Read more: Sanna Marini’s tweet questioned central banks’ interest rate hikes – the European economy may soon experience the hardest blow since World War II.

World may be entering a new era where inflation will remain our guest for a long time.

Read more: The market is divided in two before the Fed’s interest rate meeting: Some believe that stock prices will rise soon, some expect a complete collapse

Britain’s last week’s interest rate crisis, in which the Bank of England had to save the country’s pension companies with its purchase program, was for many an example of what the future balancing in the jungle of state stimulus attempts and rising interest rates can mean.

Seeking growth through tax cuts and increasing public debt will not succeed if the market does not believe in reforms.

Whenever governments or central banks try to stimulate the market, inflation rears its head.

Central banks have to stand on one side of the seesaw easily for half a year, because the effect of interest rate hikes on inflation takes time. Because of this delay between the central bank’s actions and its effects, central banks often “have” to raise interest rates too much.

When the big picture of the economy changes, a careful investor keeps his risk level low.

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When the stock market often predicts economic turns about half a year ahead of time, the investor should still estimate when that turn will come.

Blackrock said in his weekly letter that he expects a recession in key emerging markets. In the United States, recession may derail next year, in the euro area earlier and more sharply due to the energy crisis, the world’s largest asset manager predicts.

According to Blackrock, we are now living in a time of tactical investment policy. It means “least bad options” and favoring bond investments rather than stocks. Blackrock still considers the shares “relatively attractive” in the long term.

According to Blackrock, its view is based on the fact that fears of inflation and higher interest rates were not fully priced into the stock prices of developed countries, at least on October 3, 2022.

According to Blackrock, profit expectations are also optimistic.

Economic forecasts expect a difficult year next year. When the stock market often predicts economic turns about half a year ahead of time, the investor should still estimate when that turn will come.

The view is exceptionally unclear. Political upheavals can now bring big changes to both exchange rates and faith in the future – and quickly.