Investors will have 3 ideal entry points into the stock market over the next few months as bear attack persists, says BofA


A trader works at the New York Stock Exchange NYSE in New York, the United States, March 9, 2022.Michael Nagle/Xinhua via Getty

  • Investors will have three ideal windows to go public by early 2023, according to Bank of America.

  • The company said that, as with bear attacks in real life, it is important for investors to stay on their feet and not panic.

  • “While every bear market is different, the fact is that every major market downturn in the past has been followed by a rally – and more,” BofA said.

Investors will have three prime times to buy stocks through the start of 2023 as the bear market decline continues, according to Bank of America.

In a Wednesday note, head of market strategy CIO for Merrill and Bank of America Private Bank Joseph Quinlan said investors should do the same thing in the stock market as they would in real life if they encountered a bear: don’t run, don’t panic and hold on.

“The principles apply whether you’re on a deserted road in Yellowstone National Park or standing on the trading floor of the New York Stock Exchange,” Quinlan said.

And with plenty of bad news already priced into asset prices, buying stocks at current prices should prove to be good long-term business, according to Quinlan, who highlighted three ideal times to buy over the next few months.

“We see three entry points for investors, ranging from June/July as the bear market matures, in [the] third and fourth quarters when 2023 earnings reset, and early next year when the Fed tightening cycle ends,” Quinlan said. “Holding on is about sticking to your underlying investment philosophy, being opportunistic and taking a long-term view.

That means investors shouldn’t panic and miss the market because missing a few days of outsized gains could negatively impact a long-term investor’s total return, according to the note.

Instead, long-term investors should look to take advantage of the S&P 500’s more than 20% year-to-date decline.

That’s because the S&P 500 has proven to be a “stable, predictable wealth-generating machine,” delivering “gross” compound annual returns of 11% since 1945. “Don’t run from a bear, in other words “, said Quinlan.

But there is one big unknown that could prolong the decline in stock prices, and that is an economic recession. And while that’s not the base case for Quinlan, the same rules for economic downturns apply to bear market selling: “don’t run, don’t panic, and hold on.”

“Recessions can be painful and costly in the short term, but the aftermath of an economic downturn is generally salutary. Downturns rid the economy of its excesses; reallocate capital to more productive parts of the economy; and create and destroy, leaving companies stronger and more competitive, and stocks are poised for more upside,” Quinlan said.

“While every bear market is different, the fact is that every major market downturn in the past has been followed by a rally — and more,” Quinlan said.

Whether this will be different this time around as the Fed raises interest rates to keep inflation under control remains to be seen.

Read the original article on Business Insider


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