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How to Take Advantage of the Recent Stock Market Dip.

The past few months of 2022 have showcased a largely bearish global market. Both the tech-loaded Nasdaq and benchmark index S&P 500 have plummeted by many points.

Before we understand strategies on where and how to invest in these times of turmoil, let us first understand the reasons that have contributed to the bearish market.

1. Russia-Ukraine War

The Russia-Ukraine war has disrupted global supply chains, resulting in prices of essential commodities like oil and wheat shooting up worldwide.

People have been forced to liquidate assets in want of more free cash to buy basic goods and keep themselves afloat. Many are selling off tech stocks and resorting to safer securities like gold that promise stable returns.

With the uncertainty a war brings, global markets will continue to remain impacted by the macroeconomics of the region and its repercussions till the war ends.

2. Post-Pandemic Bubble Burst

Tech and essential services witnessed a boom during the pandemic and experienced staggering growth, facilitating the formation of a wealth bubble. But as restrictions were lifted and demand for these services waned, the bubble burst, sending markets into chaos.

3. Panic Selling

The volatile market conditions have resulted in investors panic selling their stocks. The rapid and mass exit in the market creates massive uncertainty and devolves the stock prices even further, creating a feedback loop.

4. Soaring Inflation

Interest rates are soaring high as inflation shoots up, closely chasing each other. The direct brunt of which is borne by the people.

A rise in the inflation rate simply implies a rise in the cost of raw materials and less buying capacity in the common masses. This causes people to stop investing and save money for the higher cost of living.

5. Infrequent Retail Investors

With travel time getting eliminated and easy access to investment apps, the stock market witnessed ‘guest investors.’ The purchases were not often well-researched and based on inadequate trading knowledge.

This created uncertainty in the market, leading to the overvaluation of certain shares as these retail investors exited the market post-pandemic.

What is the Way Forward?

Despite odds, good news awaits!