If you’re looking for signs of doom and gloom, so probably won’t be disappointed. For long-term investors, however, even the darkest storm clouds may have silver linings.

“The S&P 500 has performed so poorly this year that it is now trading at a scarily low level. That usually presents an attractive opportunity for longer-term investors. The market benchmark, down more than 11% for the year, just hit a ‘death cross.’ That is when the index’s 50-day moving average falls below the 200-day number,” writes Jacob Sonenshine of Barron’s. “Although that makes things in the stock market feel bleak, it is probably a good time for longer-term investors to buy stocks. Historically, the S&P 500 tends to post impressive gains in the 12-month period following an initial close in a death cross.” 

The tech sector has been hit especially hard. “The technology-focused Nasdaq Composite dropped 262.59 points, or 2%, to 12581.22, its lowest level since December 2020,” write Joe Wallace and Scott Patterson of The Wall Street Journal. “Shares of Apple fell 2.7% as the lockdown in China disrupted manufacturing by a key supplier. Other technology bellwethers also struggled. Amazon.com fell 2.5%; Alphabet, parent of Google, dropped 3%.”

It feels strange to be optimistic in difficult times like these, but I genuinely believe that our sector will weather the economic storms and emerge stronger. This is truly a moment for brave hearts and strong stomachs. My hunch is that investors who stay the course will be rewarded.

“To be sure, the (S&P 500) index can remain in a death cross for some time; the average period is 155 trading days. But the gains do materialize. The last time the index closed in death-cross territory was March 30, 2020, when it felt like the sky was falling as the pandemic set in. From that point, the index gained more than 55% for the following year,” Sonenshine observes. “The point is that at some point, the macroeconomic risk that sends stocks lower becomes fully reflected in their prices. And as long as corporate earnings are still growing, stocks will resume rising at some point.”

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