This is a difficult time to be an investor. The S&P 500 it’s down about 20% from its early January peak, putting it in bear market territory and the tech sector Nasdaq it is down by over 27% since the beginning of the year.
In times like these, it’s easy to feel pessimistic and discouraged from investing. It can also be tempting to get out of stock altogether. But the future still looks bright for the stock market and there are two good reasons to be optimistic right now.
1. The US stock market has a solid track record
The stock market has experienced its fair share of tough times. In the past two decades alone, it has seen everything from the bursting of the dot-com bubble to the Great Recession to the early collapse of the COVID-19 pandemic. However, despite everything, the S&P 500 has increased by more than 162% since 2000.
No one can predict for sure exactly how the US market will behave in the coming weeks or months. But historically, it recovered from every single dip it went through and eventually set new highs. No matter what happens in the near future, it is extremely likely that the market will recover eventually.
How long it will take to recover is also uncertain. But by staying invested for the long term, you are much more likely to see positive average returns over time.
2. Now it’s a fantastic buying opportunity
When stock prices are plummeting and pessimism abounds, it may seem like the worst time to invest more money in stocks. In reality, however, these markets present some of the best buying opportunities.
Many stocks have plummeted over the past eight or nine months, declines that in many cases have left them at discounted prices. If you’ve been keeping an eye on a particular company, now may be your best chance to buy when it’s essentially on sale.
This is especially true if that stock is normally trading at a particularly high valuation. Amazon (AMZN -2.99%) stocks, for example, have fallen nearly 30% over the past year.
Not only does investing during a recession save you money, it could also lead to huge returns.
While we don’t know exactly when the US market will recover, we can expect that, based on historical patterns, it will at some point. By investing now, you can take advantage of that eventual rebound. Case in point: If you had invested in Amazon in March 2009, when the S&P 500 hit its lowest point during the Great Recession, you would have enjoyed a 113% return in the following year alone.
Just make sure you do your research and keep a long-term perspective when shopping. Not all stocks will recover from downturns, and those that do may take years to reach their full potential. But investing is a long-term endeavor, and with the right actions, you can make a lot of money over time.
Make the most of a downturn in the stock market
Market crashes can be hard to digest and it’s normal to feel nervous about the future. But Wall Street is no stranger to volatility and this turbulent period will pass.
It’s not always easy to stay upbeat and keep investing, but it’s one of the smartest financial moves you can make right now. By investing in stocks of strong companies now and holding them for the long term, you can make the most of this difficult time.
John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a board member of The Motley Fool. Katie Brockman has no position in any of the titles mentioned. The Motley Fool has locations and recommends Amazon. The Motley Fool has a disclosure policy.