‘The dip is your friend’: why some advisers are telling young investors to buy stocks, despite fears of market stagflation

How low can stocks go? This question has made investors nervous as they fear one bottom after another.

The answer: pick a number. Some analysts say they are bracing for further declines, others expect a rebound.

Wall Street is nervous at the prospect of stagflation — the double-edged sword of long-term inflation and high unemployment — as the Federal Reserve tries to fight inflation by raising interest rates without pushing the economy into recession.

Anh Tran, managing partner at Orange, California-based SageMint Wealth, has some advice for young investors who have time before retiring: “These are the times when we need to take advantage of market volatility and keep investing.”

She spoke at CNBC’s “Own Your Money Before it Owns You” event Thursday.

Why? Generation Z and millennial investors have about 25 to 30 years to recover from a different bottom.

“A dip is your best friend, so buy the dip, take advantage of the fact that prices are low right now and try not to time the market,” added Paula Pant, host of the podcast “Afford Anything”, also at the event. .

“These are the times when we need to take advantage of market volatility and keep investing.”


— Anh Tran of SageMint Wealth

Buying the dip or “BTD” isn’t always as easy or smart as it seems, as Jon Burckett-St. Laurent, senior portfolio manager at Exencial Wealth Advisors, wrote on MarketWatch in April.

With the CPI hovering at its 40-year high — 8.3% in April — he said central banks may not be so eager to intervene with aggressive rate cuts or keep extra cash flowing with bond purchases through so-called “quantitative easing.” especially in the event that economic growth slows significantly.

“The next problem with BTD is that a realistic strategy requires more detail than ‘buy when the price falls’,” he wrote. “Some questions to consider: What is a dip? What money do we use to buy? When do we sell?”

Instead, Burckett-St. Laurent recommends what he calls a ‘tactical rebalancing’, say 80% stocks and 20% bonds and, once the market has recovered and fundamentals look more confident, going back to 60% stocks and 40% bonds.

He also suggests waiting for blood on the street. “If stocks are down 50%, it could be a sentiment-driven overreaction,” he added. A drop of 3%, 5% or even 10% is not exactly a “buying opportunity for generations,” he added.

Some questions to think about: What is a dip? What money do we use to buy? When do we sell?’


— Jon Burckett-St. Laurent, senior portfolio manager at Exencial Wealth Advisors

Still, a recent survey by personal finance site Bankrate found that 43% of investors aged 18-25 said they’re ready to increase their investments. More than a quarter, 27%, were millennials aged 26 to 41.

But only 14% of investors are between the ages of 41 and 57, the so-called Gen X demographics. And just 8% of baby boomers between the ages of 58 and 76 said they were likely to invest more in the market this year. About 22% said they would invest less.

Even those younger investors may now have less confidence to buy the dip. The new survey was taken a month ago – before Wednesday’s stock price in the face of inflationary jitters.

The Dow Jones Industrial Average DJIA,
+0.03%
the S&P 500 SPX,
+0.01%
and Nasdaq Composite COMP,
-0.30%
ended mixed Friday, after briefly holding positive territory earlier in the day before entering bear market territory later in the day.

The Dow and S&P 500 closed on Thursday at their lowest since March 2021. The Dow Jones Industrial Average recorded an eighth consecutive weekly decline, marking the longest loss streak since April 1932, according to Dow Jones Market Data.

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