Why is now a good time to invest?

From Fred Wilson @Union Square Ventures→ https://avc.com/2022/05/how-this-ends-2/

I believe it ends when the Covid 19 pandemic is over and the global economy recovers. Those two things won’t necessarily happen at the same time. There is a wide range of recovery scenarios and nobody really knows how long it will take the global economy to recover from the pandemic.

But at some point, economies will recover, central banks will tighten the money supply, and interest rates will rise. We may see price inflation of consumer goods and labor too, although that is less clear.

When economies recover and interest rates rise, the air will come out of the asset price bubbles that have built up and the go go markets will hit the brakes.

So I suspect we are either in a recession right now or headed to one, brought on by tightening money supply/higher rates that are being used to control inflation. That recession could easily last until the end of 2023. But we don’t really know how long it will take for this cycle to play out.

First, we need to see the economy slow down and inflation slow down. We need to see stocks bottom out and hang out there for a while. And we need to be patient. None of this is going to happen fast.

History generally doesn’t repeat itself but it tends to rhyme, and from previous interest rate regimes we can learn a thing or 2.

Here are 3 distinct interest rates scenarios with significant interest rate changes.

the 2000s tech bubble

the 2008’s GFC

the 2020’s Covid crisis

• The most notable observation from the 3 charts above is that the market drops not when the interest rates increase but actually when the rates start to descend on the way to the averages.
• Even though markets have already corrected a lot there may still be some room downwards and while it is hard to say how far that might be, it can be said we are closer to the bottom than the top now.  But that does not mean they will turn around and go right back up.
• So this presents a tremendous opportunity to invest but
  • Since the stock market looks ahead, and economic reports are reviews of the past, we can miss an entire downturn if you only follow the news. Stock prices often fall months before a recession begins, which also means that they often bounce back up before the recession is declared over. The best time to get into equity during a drawdown to make use of lower prices, is to buy either before the recession starts or during its early phase. So deploying a corpus over a systemic period seems to be the best bet.