It’s been a wild ride for the stock market. And after?

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This story is part Recession Assistance ServiceCNET’s coverage of how to make smart money moves in an uncertain economy.

The stock market year was dizzying, between global uncertainty, high inflation and rate hikes. We are officially in a bear market (again), with another Federal Reserve meeting and interest rate hike expected next month.

You’re probably wondering, “What next?”

With inflation still uncomfortably high and more rate hikes on the horizon, the market is likely set for a bumpy ride.

“Investors should prepare for greater market volatility,” said Mahesh Odhrani, certified financial planner and president of financial planning firm Strategic Wealth Design.

The short-term fate of the market depends on several factors, so any predictions of what’s to come are just educated guesses. The Fed has raised interest rates five times this year to fight inflation. Now a recession seems more likely that a “soft landing”, according to the chairman of the Federal Reserve Jerome Powell. And while it’s impossible to say how deep this recession might get or how long it will last, such a downturn will certainly inflict more pain across the board, including a slight increase in unemployment.

While experts point to a light at the end of the tunnel, the market usually gets worse before it bounces back. Here’s what five experts said is likely to happen as 2022 draws to a close and we gear up for 2023.

Where Experts Predict the Stock Market is Heading

portrait of financial expert Mahesh Odhrani

CBS

Market uncertainty will persist.

“Investors and markets have underestimated inflation and the resilience of the US economy so far. Market volatility is unlikely to change over the next six months.” — Mahesh Odhranifinancial planner and president of Strategic Wealth Design.


profile of financial expert Doug Carey

CBS

Prepare for an official recession.

“The stock market will continue to be volatile in 2023. A recession in 2023 is very likely, which means the stock market is likely to experience further declines.” — Doug CareyChartered Financial Analyst and President of WealthTrace.


Portrait of financial expert Sonja Breeding

CBS


A guessing game, at best.

“Anyone who tells you they know what’s going to happen, you should probably run as far as you can the other way.” — Sonja BreedingCFP and Vice President of Investment Advisory at Rebalance.


Portrait of the financial expert, Jeffrey Roach

CBS

“Reasonable returns” are possible next year.

“If inflation comes down due to the aggressive actions of the Fed, I think we will see reasonable returns in the stock market over the next year.” — Robert JohnsonProfessor of Finance at Creighton University’s Heider College of Business and Chairman and CEO of Economic Index Associates.


cnet-money-insert-krill

CBS

A stock market indicator is a good omen.

We’re seeing P/E ratios much more in line or in fact below historical averages for most things, which bodes very well for the future.” – Kirill SemenovCFP and Wealth Advisor at Intellicapital Advisors, LLC.

Expect continued volatility

If there’s one constant you can count on in the stock market right now, it’s volatility.

Don’t expect much change in market volatility over the next six months, as the threats to economic growth remain the same, namely the war in Ukraine, the energy crisis in Europe, global inflation and the problems of supply chain, among multiple climate disasters, says Odhrani.

And what happens with inflation will play a big role in market changes. For example, market volatility could decline if inflation stabilizes and the Fed begins to ease its rate hikes, said Sonja Breeding, CFP and vice president of investment advisory at Rebalance. But she also warned, “I don’t have a crystal ball. It’s kind of hard to tell.”

A recession until the summer of 2023 is likely, which means that the stock market will experience further declines for a bit longer, said Doug Carey, chartered financial analyst and president of WealthTrace, a web-based financial and retirement planning software.

Although the performance of the US economy in the first half of 2022 corresponds technical definition of a recession – two consecutive quarters of decline – an official recession has not yet been announced. Yet the economy remains fragile, and this is reflected in the current market performance.

Although experts can provide forecasts based on previous market trends, do not rely too much on forecasts. “Anyone who tells you they know what’s going to happen should probably run as far the other way as possible,” Breeding said.

Signs point to market recovery next year

However, not all is bleak in 2023. Historically, after inflation starts to subside, the Fed starts to cut interest rates and the stock market starts to rebound. “History shows that as soon as it’s very clear the economy is in a recession, that’s when the recovery starts,” Carey said.

“If inflation declines due to aggressive Fed actions, I think we will see reasonable returns in the stock market over the next year,” said Dr. Robert Johnson, CEO of Economic Index Associates. At the same time, Johnson noted that any unforeseen circumstance, such as another wave of the pandemic or a global conflict, can derail this.

Still, the latest data on price-earnings ratios has experts optimistic. P/E ratios compare a stock’s current price with its latest earnings per share, and they tend to be fairly reliable indicators of where the market is headed. A high P/E ratio generally indicates a growth stock, although it could also mean that a stock is overvalued.

“We are seeing P/E ratios much more in line or in fact below historical averages for most things, which bodes very well for the future,” said Kirill Semenov, CFP at Intellicapital Advisors. “No indicator paints the full picture, but more subdued P/Es are generally considered a better time to invest than buying into inflated valuations.”

Investment moves to be made in an unstable market

Ups and downs are an integral part of investing. In the current climate, experts recommend long-term investments, which give you a better chance of riding the waves. And with markets falling, investing now could mean buying stocks at a lower price.

According to experts, here are some tips for investing in the market.

playing it safe

Opting for low-risk, long-term investments spread across several companies or sectors can help you diversify your risks. Most investors should opt for an index fund rather than actively trade stocks, according to Johnson.

“Too many people believe that active trading is necessary for successful wealth creation,” Johnson said. “The best strategy for most investors is to simply invest in a broad index fund, either mutual funds or ETFs. [exchange-traded funds]that tracks market performance.”

Diversify your portfolio

Rather than putting all your eggs in one basket, try diversify your investment portfolioOdhrani said.

“Stay diversified across multiple asset classes and sectors,” he said. “They say in baseball it’s all about singles and doubles. Diversification is hitting those singles and doubles rather than trying to hit a home run. Diversification can make the long run easier, especially on volatile markets.

Don’t let your money depreciate in savings accounts

Although some high yield accounts started offering savings rates of 2% to 3%, most still hover around 0%. “Leaving too much money in bank accounts or money market accounts that earn virtually no interest can destroy savings,” Carey said.

Although you should leave enough money in an easily accessible savings account to cover emergencies – between three and eight months of minimum expenses – any money above this amount can be better used.

“If inflation is 7% every year and you have money in a bank account that only earns 0.5%, almost 40% of the value of that money is wiped out in terms of the power of purchase after 5 years,” Carey said.

Treasuries are currently one of the best ways to beat inflation, according to Carey and Semenov. Inflation-protected Treasury securities (TIPS), also known as bonds, and I bonds. another Treasury-backed investment vehicle, both offer savings rate above 9% right now, which can help protect you against inflation.

Hang on for the ride

When you see so many stocks in the red, you might be tempted to sell your holdings. Avoid impulsive movements, recommends Odhrani.

“It’s painful and investors are nervous, but making rash decisions can hurt them,” he said. “We believe the best thing investors can do in crazy times like these is to stay calm, invested, diversified, and focus on their long-term goals.”

Playing the long game, rather than jumping ship when stocks are down, can lead to higher returns down the line. “You never really know when the market is going to peak or fall,” Breeding said. So investing a fixed amount on a regular basis can help you average your overall purchase price, regardless of what’s happening in the market.

Ultimately, Breeding hopes the U.S. stock market will emerge from its slump.

“We’ve built our company on productivity and determination,” Breeding said. “I think that will continue in the future and strengthen the economy as it always has.”

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