“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” — Winston Churchill

Although this has been an uncomfortable market, there are several reasons to remain optimistic about the potential for recovery:

• 85% of the market’s best days occur within two weeks of its worst days.
• Only 3% of the time is market sentiment as bearish as it is now — historically, a strong bullish signal for the year ahead.
• Corporate buyback authorizations are at record highs in 2022. Combined with the long-term decline in outstanding shares, this is a powerful market support.
• U.S. companies will pay record-high dividends in 2022.
• 20% of the S&P 1500 now yield more than 10-year U.S. Treasury bonds.
• Inflation can be reduced quickly — though not without some short-term discomfort.
• Price spikes from shortages (infant formula, gas, etc.) are often followed by sharp declines as hoarders liquidate and supply returns.
• The auto industry is a prime example: when semiconductor supplies normalize, vehicle inventory will flood the market, easing prices. The sale of “brand-new older year models” may sharply reduce inflation measures.
• Oil production outside of Russia is increasing.
• Toyota and Cadillac are introducing electric vehicles — a long-term positive for both environmental and fuel cost concerns.
• Historical market trends show fewer down years, faster recoveries, and lower investment fees.
• Market declines generate cash reservesn — fuel for future recoveries.
• Geopolitical updates: U.S. discussions around supplying Ukraine with long-range missiles may pressure Russia’s energy sector, potentially hastening the end of conflict.
• Insider buying is rising sharply after the market’s recent drop. Historically, this pattern precedes a 15 – 20% rebound within three months.

Despite the current discomfort, these factors give us good reason to remain confident in the long-term trajectory of the market.

Katz Family Financial