Since early 2022, the market has been incredibly volatile. But things have been looking up slightly in recent months, as the S&P 500 is up nearly 7% since the beginning of the year.
Many investors are hopeful that perhaps stock prices have already bottomed out and we're in the early stages of a new bull market. However, with recession fears still looming, others believe we're not out of the woods just yet.
Times like these can be conflicting for investors. If this is the start of a new bull market, now may be one of the best possible times to buy. But if prices are going to drop again, it's tempting to wait.
Is it really safe to invest right now?
Should you invest now or wait?
It's true that a recession may be on the horizon later this year. Analysts from JPMorgan Chase recently predicted that there's a greater than 50% chance the U.S. will experience a recession sometime in 2023.
While that can be daunting, it doesn't have to change your investing strategy.
A long-term outlook is critical during periods of volatility. The market is famous for its wild short-term fluctuations, but over decades, it's incredibly consistent when it comes to earning positive returns. In other words, if you're a long-term investor, there's probably never a bad time to buy.
For example, say you invested in an S&P 500 index fund in January 2009 -- just before the market bottomed out amid the Great Recession. That would have been a difficult time to buy, as your investment would have almost immediately lost value.
However, within just five years, you'd have earned returns of around 105% -- more than doubling your money. By today, your returns would amount to more than 350%, and that initial downturn would be a blip on the radar.
How to take advantage of the next bull market
One of the toughest parts about investing in the stock market is its unpredictability. Nobody -- even the experts -- can say with certainty how the market will perform over the coming weeks or months. It's impossible to know, then, precisely when the next bull market will begin.
However, the stock market is forward-looking, which means it generally experiences fluctuations before the economy. When investors are worried about a potential recession, for instance, stock prices will often fall well before the recession actually begins.
The silver lining to this, though, is that the market also generally recovers ahead of the economy. In nearly every recession over the past 50 years, the S&P 500 began its rebound before the economy reached its lowest point, according to research from JPMorgan Chase.
In other words, the best way to take advantage of the next bull market is to invest now, during the low points. If you wait until the economy regains strength, you may miss the most lucrative part of the market's recovery period.
The market may be volatile right now, but there's good reason to be optimistic. By investing during the market's slumps and keeping a long-term outlook, you're far more likely to earn positive returns -- regardless of what happens in the near future.
