Should I sell all my stocks and buy again when the market is low? Expert

Should I sell all my stocks and buy again when the market is low?  Expert Michael Farr says that during market time, focus on 'nonsense' instead

Should I sell all my stocks and buy again when the market is low? Expert Michael Farr says that during market time, focus on ‘nonsense’ instead

Regular investors have many questions about the recent sinking of the stock market.

They want to know if they should take advantage of the recent pullback (the S&P 500 has dropped 20% so far), wait for a better chance or be completely sold out.

This is a normal question to ask. So MoneyWise has chatted with fund manager and regular CNBC contributor Michael Farr to choose his investment brain about what to do in the current market.

His advice is simple: don’t try to make time.

“Market time doesn’t work, it will get you there in the end,” Farr said “You’re going to buy it at 10% pullback and it’s ridiculous to think that it will become material for you 20 years from now.”

But when it comes to bullish stocks, he believes investors should be cautious and pay attention to a few important headwinds.

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Fed

Tightening monetary policy is one of the major concerns of the stock market at the moment.

The Fed kept its benchmark interest rates historically low during the COVID-19 epidemic. But with inflation now at a 40-year high, the Fed has already doubled its rate in 2022.

But the big question is whether the economy and the resulting stock market can handle the high-rate environment.

“The market can handle high interest rates, but not much,” Farr said.

Farr suggested that a two- to three-fold increase in inflation control might be enough to keep our economy from slowing down. The danger is that the Fed could overdo it.

“Historically, the Fed did it wrong,” Farr warned. “It simply came to our notice then. And we’ve been in recession for more than 80% of the time since the Fed started the hiking cycle. “

The capital market

When interest rates rise, high-value growth stocks, which have high earnings expectations, tend to get the most hit.

That’s why Farr believes now may be the time for price stocks – “discount” securities to be traded – lower than the average price – to shine.

“We’ve been through more than a decade where inflation has slowed down,” Farr said, “and those companies that have really good balance sheets and cash flow and if not limited, you know, have reasonable amounts of debt, I think already performed. Has started. ”

Farr notes that these “style changes” usually occur over multiple years. But in which particular case should investors meet?

“Of course I like healthcare, I like industry, I like financial stocks. And I think there are opportunities for big-cap technology, solid balance sheet companies. “

“It feels like a blue-chip environment in almost any sector.”

Suitable for power tailwind, but no autopilot

In 2021, energy was the best performing sector in the S&P 500. And as the pace of oil prices strengthens, the sector continues to attract investors in 2022, even as broader markets slide.

The energy select sector SPDR ETF has so far surpassed the S&P 500 by almost 41% year over year.

Farr acknowledges the strength of commodity prices, adding that barriers from Ukraine and other parts of the world could keep oil and gas prices high.

But he also mentions the volatile nature of oil-like cycles: investors usually get three or four good years in the cycle and then have to deal with several bad years.

If you want to succeed in space, you need to be careful.

“A cyclical stock requires a buying and selling decision that you really need to get right. The sector has a tailwind, but it is not a set and forget it is a kind of sector. “

Bottom line

The stock is volatile. We all want to buy low and sell high, but no one can time the market properly.

For long-term investors, it may be best to ignore the ups and downs of the stock market.

“My colleague John Washington says the best time to buy stocks is when you have money, and the best time to sell stocks is when you need money,” Farr said. “Otherwise, don’t worry about where the stock market is.”

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This article provides information only and should not be construed as advice. It is provided without any warranty.

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