Yesterday, in part one of this newsletter, I wrote about the importance of keeping calm and managing risk during the bear market conditions we are currently experiencing. Today, I’d examine the flip side of the coin and consider the opportunities that present themselves to investors at this stage of the market cycle.
Take a look at this chart. What do you see?
The first thing that jumps out to me is that mean reversion is alive and well, with valuations quickly sliding to pre-pandemic levels in the first half of 2022.
This is how you reach a bear territory – which we did this week when the market retreated near the 15-year average Price-to-Earnings ratio of 15.7x.
Bear markets are tough because investors see the value of their portfolios falling. However, if you have a long-term mindset and timeline, this opportunity should excite you because assets are available at a historical discount. Sound investments will retain their value and rebound when market conditions change.
Sowing the seeds
The irony of bear markets is that the investments you make during these periods will be the ones on which you will see your greatest gains.
If you have cash on hand, the rising inflation is eroding its value, so now would be a wise time to consider deploying it into long-term investments at discounted rates. These are the times to plant the seeds of durable growth in the future.
Strategy is crucial
Discounted or not, it is essential to consider your investment decisions and not just go all in. These are treacherous market conditions and should be navigated with care. I am currently planning portfolio strategies with clients involving staged buy-ins and identifying discounted equities whilst maintaining strong inflationary hedges on every portfolio.
You can learn more about our investment strategy in the current conditions by joining our H1/Q2 investment review webinar, Navigating the Bear Market, on July 21.
If you would like to review your portfolio or explore how you can invest with confidence, please book a call with Michele to arrange a consultation.
Senior Investment Strategist
Michele Carby Practice – Holborn Assets