Stocks have been performing well recently, with the S&P 500 and Nasdaq seeing significant gains over the past week, recovering from losses in the previous sell-off. This recovery has been supported by positive retail sales data, a decrease in weekly jobless claims, and a drop in inflation to below 3% for the first time since 2021.
Despite this recovery, market experts warn that investors should prepare for continued volatility in the coming months as we transition from summer to the end of the year. While the current bull market may still have room to grow, fluctuations in stock prices are expected to persist.
What experts say is next for the stock market
The recent market turbulence serves as a reminder that pullbacks are not uncommon, and investors should be ready for unforeseen periods of volatility. Experts suggest that the market sentiment has shifted from concerns about inflation to fears of a potential recession due to changing economic data.
According to Denise Chisholm of Fidelity Investments, historical data indicates that there is still potential for the stock market to reflect positive news, as measured by the U.S. Composite Leading Indicator index. This suggests that stocks could see an average return of 13% over the next 12 months.
What investors should do
While reacting to economic headlines and recession predictions may be tempting, financial advisors recommend maintaining a well-diversified portfolio aligned with your financial goals. It’s crucial to regularly review your risk tolerance, liquidity needs, investment horizon, and portfolio allocation to adjust for potential market fluctuations.
To mitigate volatility, consider rebalancing your portfolio to reduce risk exposure or increase liquidity based on your individual circumstances. Don’t make impulsive decisions based on short-term market movements; instead, focus on the long-term performance of your investments.
By staying informed and making strategic adjustments, investors can navigate market volatility with confidence and ensure their financial stability in the long run.
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