Should Long-Term Investors Shake Up Their Strategy Right Now?

Should ongoing stock market volatility impact the way you invest right now? In this segment of Backstage Pass, recorded on Jan. 5, Fool contributors Rachel Warren, Trevor Jennewine, and Jason Hall discuss some recent Wall Street predictions for 2022 and investing during choppy market times.

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Rachel Warren: Well-known investors and titans on Wall Street, they’re already unleashing their boldest predictions for the new year. Yahoo Finance recently reported that well-known investor, Jim Rogers, who co-founded the Quantum Fund with George Soros in the ’70s. Jim Rogers has said that the next bear market, he’s predicting that will be the worst of his lifetime. He’s choosing to load up on commodities like silver for crash protection in 2022.

On the other hand, CNN just reported on Monday that “Wall Street is Getting Greedy Again”. According to the piece, “the CNN Business Fear and Greed Index, which measures seven indicators of Wall Street’s mood, is now showing signs of Greed, with three of the indicators at Extreme Greed levels. Just over a week ago, that index was flashing Fear warnings.”

The article also noted that Wall Street doesn’t really seem to be all that concerned about the Omicron variant or even rising interest rates over the long term.

The article also quoted Chief Global Strategist and head of the Barings Investment Institute, Chris Smart. He said “companies will produce ample profits this year as they reinvest in their own growth and vaccines that continue to help tame new variants of the coronavirus”.

He also thinks supply chains will be normalizing and that emerging markets’ demand will benefit from global recovery. Clearly, these are two very different takes as we’re heading into the New Year.

I’m curious to get each of your takes on this. Which of these trains of thought do you agree with if either? Does this change anything about how you’ll be buying stocks in the coming months? Trevor.

Trevor Jennewine: I’m going to split the middle here. I think the truth is probably somewhere in between.

I think saying that the next bear market could be the worst of our lifetime is a bold statement. I think 2008 was pretty rough.

Jason Hall: That’s a little bit of a get off my lawn. [laughs]

Warren: Little dark.

Hall: Yeah.

Jennewine: Right. But on the other side of that, I also don’t think that Wall Street is not concerned about rising interest rates. Looking at my portfolio, it seems like Wall Street is concerned about rising interest rates. I think those concerns are relatively contained to the high-growth tech stocks, which makes sense.

A lot of those growth companies are valued using interest rates to discount future cash flows back to their present value.

As those interest rates go up, the future value of that money is worth less today. I certainly do think the next bear market could be rough.

Even after we’ve seen some sell-offs recently, there’s some high valuations out there, but it’s not going to affect my investment strategy. Like you mentioned, Rachel, in the end of the show, I’m looking for companies that can hold for 5, 10, 20 years.

The long-term winners. Right now, I’m accumulating some cash on the sidelines, looking to put it to work as things continue to go down, but overall, I’m keeping my strategy on course.

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